Gold and Silver Are the Only Safe Havens
Bob ChapmanThis past week we saw gold trade 12 days over $700, the most momentous gold event since gold began its six-year journey from $252.00 an ounce. Soon phase one of the gold bull market will be completed at $850.00 and ounce.
The breakout was triggered by a collapsing dollar, triggered by a real estate and credit crisis that not only affected the US, but Europe and Asia as well. The ECB has dished out over $350 billion that we know of and the Bank of England is in for another $100 billion to go along with some $300 billion via the Fed. Then there are all the other miscellaneous countries. Thus, at least $850 billion has been pushed into the world monetary system.
This is a major gold breakout with nothing but blue-sky until we hit $850. That should take silver to $25-$30 as well. There is no real resistance at $850, it has been 27 years. There is no overhang. It’s just psychological. We also do not know how much gold the gold suppression cartel has left. It can’t be much.
This is a storybook layout. Eleven percent plus inflation driven by lower interest rates, M3 at 14%, and massive amounts of liquidity being driven into the system. This is even more powerful than 1978-81, because we already have a crisis in world credit that has only just begun. As a kicker the dollar is headed for 72-75 on the USDX, the dollar index, and more likely 40 to 55. Thus, after we break the psychological barriers of $850 and $1,000, it is probably $2,500 for gold.
Spain sold 150 tons of gold and the government says that there will be no more sales. 150 tons was enough – what fools. All of Asia and China and India are buyers as is all of the Middle East. Russian President Putin has told their central bank to raise the gold share of its $420 billion in reserves.
All nations are lying about inflation. England says 1.8% as food prices double and petrol prices continue to climb. Then we have the ECB that expects us to believe their inflation is 2%. China just jumped 6.5%. Then we have 18 of 20 major central banks with M3 of 14% plus on average. It doesn’t get anymore bullish.
Then we have England with 300 tons left, that may be going to be leased, which is not good delivery. That means they do not meet LGD standards and probably will have to be re-refined. Some gold is in bars, some in coins and some in ingots. The gold has been accumulated since around 1840 and over the years there was no standard. There has not been an external audit since 1954 for US gold, thus, it may not be good delivery or it may not be there.
Gold is again leading the way with silver in inflationary times. Gold is reasserting its monetary role and as the ultimate safe haven. Gold shares versus bullion are very undervalued. They are trading as if gold were at $600 an ounce due to suppression by our government. That is why we believe that there are spectacular gains ahead. In order just to catch up, a stock like Agnico Eagle (AEM-NYSE) would have to move from $50 to $80 a share. Back in the 60s, 70s and 80s, stocks like AEM sold at 150 times earnings and we believe that will happen before this run is over. The HUI has broken out to new highs and soon we will see stocks like AEM flying again. The entire HUI is way undervalued versus gold. You have hitched your wagon to a star and don’t let go. Buy more gold and silver coins and shares.
We send the message out again, anyone who owns SLV, the silver ETF, should have sold it long ago. The GLD, gold ETF, is in the same sell spot. These positions should be liquidated and moved into gold and silver coins and shares. Barclay’s that has the silver ETF could go bankrupt due to derivatives, CDO, ABS and CP losses. Besides, if you read the contract you will see they do not have to take silver delivery, they can buy futures contracts. Where would you be if Barclay’s went under? You would be just another unsecured creditor. We cannot get access to an audit on GLD because their contract with the depository doesn’t allow for it. Have they been lending gold? We believe they have and we believe they are not taking delivery of some of the gold they purchase via futures contracts and derivatives.
It should be noted in reference to silver that recently the commercial shorts covered almost 20,000 contracts equal to 100 million ounces of silver. That was the turning signal for silver and since it has picked up steam to the upside. We believe that silver is a runaway locomotive. That, of course, gives great leverage to silver stocks like Silver Standard (SSRI-OTC).
When looking at shares of producing gold companies be sure to check their costs. Total cash costs in the first half of 2007 were $371 an ounce or 21% higher yoy, and there will be no let up in cost increases. We do expect that the difference between the cost to mine and sales will decrease. Costs will just go higher, so gold must go higher.
As you are well aware, China holds 18.3% of all US Treasuries. It is rumored that the Chinese have a deal with George and the neocons that they will buy US Treasuries with their surplus and in return George Bush will veto any fair trade legislation with tariffs on goods and services. The problem is the Chinese grew skeptical of the deal and its consequences and in July, August and September they have been sellers of some $14.7 billion of Treasuries. What tipped the balance and the agreement was the sale of AAA rated toxic junk, with fraudulent ratings. Central banks and other bankers are furious. Other currencies will be beneficiaries of this flight from the dollar, but in time gold will be the big winner. This means lower interest rates, massive monetization and money and credit creation. In Europe the ECB has held rates down. They nevertheless have increased M3 at 11.7% and England has increased theirs by 13%.
Making matters worse for the US is rising oil prices that have to feed inflation. The Saudis and others in the oil producing business in the Middle East look like they are about to sell oil in currencies other than dollars. The Saudis could be large dollar sellers and if that happens the petro dollar will be dead and so will the dollar as the world’s reserve currency. The American elitists have again sold everyone out to save their own hides’ short term by lowering interest rates. The game is over and gold is again king of the currencies. There is $4.4 trillion in US securities out there and if just a small percentage were sold it would raise havoc with the value of the dollar and US securities. All these years foreigners have helped keep the dollar strong and inflation low and that is in the process of ending. There is every reason to sell the dollar. Not only financial ones but political ones as well. Foreigners despise this administration. They are well aware of the fiscal profligacy and the horrendous debt built up by this administration and the average American. The administration has been told by every international organization that their fiscal policies and debt accumulation on and off budget is unsustainable and would end up in economic disaster. George Bush could care less.
As we have said so often, you cannot put a slide rule or a statistical formula to economies and markets and that is because human nature is simply unpredictable. The scientists may think they have it nailed down like economists such as Keynes. His theories have been refuted so often that they sound like a broken record. Statistics are never complete because they leave out the human factor. That factor is the most important part of the puzzle.
How can government continue to function adequately when the rich are overwhelmed with tax breaks not afforded to the poor and middle class, private mercenary armies are employed at tremendous cost that answer to no one and no bid contracts that are a license to steal? In the background aiding and abetting are the Democrats as spineless as ever never seeing a spending bill they didn’t like. As this transpires our media covers it up, particularly Wall Street’s cheerleader CNBC. The public wants and needs higher wages, but they are not forthcoming so they accumulate more debt. Unemployment is 13-1/2% and it is starting to climb again as inflation moves well into double digits. Our jobs are on a sharp trajectory to foreign lands as free trade, globalization, offshoring and outsourcing devour our jobs. Five million good paying jobs gone and 40 million more line up to leave by America’s transnational elitist conglomerates. America is living on the steroids of credit and that credit will wind down as it becomes more expensive. The prosperity seen since 2002 has been the result of financial smoke and mirrors. The financing scams have resulted in a credit crunch that isn’t ending anytime soon.
Banks are faced with personally funding $1.2 trillion in commercial paper with CDO or ABS collateral. They do not have the money so the Fed will provide it, monetizing and creating massively more inflation. The key to saving the banks and Wall Street is to provide more credit and that is what the Fed will do. That, of course, means the death of the dollar and America’s future as we slide toward 2nd world status.
It is becoming more apparent that banks cannot cover their losses and at the same time our Treasury Secretary, Mr. Paulson, on loan from Goldman Sachs, tells us this economy is far and away the strongest global economy he has seen in his business lifetime. We must be looking at a different economy than he is. Mr. Paulson isn’t stupid so we’ll call it lies and chicanery. That is something Goldman Sachs is famous for. If you criticize Goldman Sachs and tell the truth about what they are doing in league with our government, they sue you to shut you up. Derivatives, structured finance and the new architecture of financial markets are frauds – Ponzi schemes. These are vehicles for credit creation all totally unregulated to serve Wall Street and the banks.
We are still in the first phase of the credit crunch and the Fed, Bank of England and the European Central Bank are funding the collateral they are holding against loans that are almost worthless. That means many lending institutions, which actually hold mortgages, CDOs and ABSs, could go under if real estate does what we believe it is going to do. The solvency of many institutions is at stake and all the money and credit the Fed can conjure up won’t save them. Banks are sitting on major losses and if real estate goes lower watch out below. When you are looking at losses on all these investments you have a serious problem and that is where many banks and other institutions are today not only in the US, but in Europe and Asia as well. In England all bank deposits have been nationalized. The government is guaranteeing all deposits. Now the government – the citizens – are on the hook for all that debt. The public has to pay even though the Bank of England is private as are the banks. Talk about a license to steal. When things are going well, the banks profit. When things go wrong, the public gets to pay for it. That is a corporatist/fascist system. This is the same kind of system that flourished under Hitler and Stalin. This is not what we call sound money and it violates British law. The action is arbitrary and capricious.
As we predicted the debt limit will be raised to $9.82 trillion from $8.465 trillion and that is the fifth increase since George Bush took office.
The Fed has tried several things to counter the credit crunch and none of them has as yet worked. Their only accomplishment has been to send the dollar to its lowest level in 26 years. They have sacrificed the dollar to save Wall Street and the banks just as they did in 1971. Wall Street believes they have to be protected, that central banks and dollar holders worldwide have to be sacrificed. They have lowered interest and discount rates to induce borrowing money that is created out of their air, which they have the nerve and arrogance to call economic growth. After 36 years of papering over problems with money and credit it isn’t working anymore. This is borne out by the collapse of the dollar. This is why the elitists have spared no effort or expense to support the dollar and to prevent the rise of gold. Other central banks obviously are not participating. They are very upset that Wall Street, investment banks, rating agencies, banks and the Fed have deceived them and left them holding the bag on almost $2 trillion of debt. There was no coordinated attack on gold and silver over the past two weeks, and gold hit new highs. The US faces the prospect of economic implosion as their debt system collapses. That is why gold and silver is your only haven of safety.
We are in a recession and it becomes more evident each day. The dollar, which underscores and supports, our economy is imploding and our debt system has collapsed. In the final analysis only gold matters.
The swindle we have just witnessed by Wall Street is of epic proportions and it happened in an unregulated market with the help of and connivance and assistance of the rating agencies, which are in Wall Street’s back pocket. How can this crisis, which was caused by excess liquidity and a deterioration of credit standards, be solved by a cut in interest and discount rates? The cuts only add more liquidity to a market that is already over-inflated. The housing and credit bubbles were created by too much money, which was the Greenspan Folly and now Bernanke is just following in his footsteps. The Fed and Wall Street are just temporarily putting off failure. Our government aids these crooks at every turn. Government statistics are bogus and now everyone is catching on. Food prices have risen over 18% annually as the Fed cuts rates. Americans have seen six years of stagnant wages and have had to borrow from their home equity or credit cards to make it. The punch bowl has been refilled and not been taken away as it should have been. We have a systemic problem – we are insolvent and only owning gold and silver assets can save you from the collapse of all currencies.
It comes under the heading it’s good for the nation. That is the “Working Group on Financial Markets” better known as the “Plunge Protection Team.” We are told that the Chairman of the Fed, the head of the CFTF, the head of the SEC, the Chairman of the New York Fed, and the Secretary of the Treasury run it. In fact, the major force is the Secretary of the Treasury, followed by the chairman of the Fed. It is their job, during emergencies, to do what is necessary to bring order to markets mandated by an Executive Order signed by Ronald Reagan in 1988. Since then our government and Wall Street have abused this privilege.
The first line of offense by this group is propaganda to psychologically influence the public. Part of that sociopath façade is a repetition of outright lies by all of the above and the investment bankers they operate via Wall Street, such as Goldman Sachs, JP Morgan Chase, Citicorp and Lehman Bros., etc. They are the insiders who assist the government in their endeavors and are privy to government intentions, which puts them into a position where they can profit by having such information. They assist this manipulating plunge protection team. Some times they believe their own propaganda and get caught in the maelstrom, as Citicorp did recently with $35 billion in next to worthless subprime loans. What the Treasury does is enter the market on an ongoing bases. Mid-August was a good example. The market was plunging and in- stepped our government, taking it back to even and on the following day, announcing a drop in the discount rate. That caused a 350-point upward move in the Dow or 700-points in reversal in just two days thanks to the criminals who run our government, banking and Wall Street.
Involved in this perpetual war against free markets is the Bank of Japan and the Japanese government. They do this to keep the yen cheap by keeping interest rates at ½%. That encourages speculators and bankers to borrow yen, buy dollars with the yen and buy securities and commodities thereby greatly influencing markets. There are some $1.5 trillion involved in the yen carry trade. These players help the Fed and our Treasury manipulate markets. Goldman, Morgan, Citicorp etc. are right in the middle of all this because they execute the orders.
When the Fed has cut interest rates in the past and not as aggressively as they did a week ago, bonds fell as yields rose. Precious metals and commodities rise, because the action is highly inflationary. All assets will fall against gold.
Toxic subprime mortgages, CDOs and ABSs have been spread all over the world. Fast on the heels of the debacle that will cost perhaps 75% of the value of these assets comes another 18 months of five million ARMs that are slated to be reset. That is followed by the mortgages that have been set again for two years this year. More than 2.6 million are subprime and ALT-A mortgages. If we continue into recession, mortgage problems could reach out as long as four years. That is because a slow economy means less work and more unemployment and at the same time interest rates will rise over that period due to inflation and the wild creation of money and credit by the Fed. Even the venerable Sir Alan Greenspan says the price of homes could fall 15%. While all this transpires few talk about the falling dollar and its consequences for our country. The over $300 billion that the Fed admits it injected into the system has not been withdrawn and there is plenty more on the way. When we get our M3 estimate soon we will see how much of those aggregates, if any, have been withdrawn from the system. We saw M3 expand 14% or 48% annualized in August. The monetary expansion and Fed commentary have become ludicrous. Some Fed members idiotically tell us they do not find gold to be a particularly useful indicator of inflation. If that was so why have they suppressed gold since October 1987? Even Greenspan, now that he is out of the Fed says rates shouldn’t have been cut aggressively because the risk of an inflationary resurgence is greater now than when he was executing what has become the subprime mortgage mess. He has called for 5% inflation when he knows inflation is over 10% and has been for four years. The only way inflation can be dealt with is via double digit interest rates and M3 expansion of 3-1/2%, any lesser formula just won’t work. This was the lesson taught to us in the early 1980s. The system has to be purged and the longer we wait the worse it’s going to be. Inflation is coming at us from all angles and it is going to get worse.
Zogby International was hired to survey adult Americans on the subject of relocation outside the US. It eliminated anyone relocating for less than two years and locating due to requirements of their job or the military.
1.6 million households have already made the decision to relocate. That figure has remained stable for the last 1-1/2 years. Another 1.8 million households are seriously considering relocation and may do it. 7.7 million households are somewhat seriously considering relocation and may do it.
Three million households are seriously considering the purchase of a vacation home or other property outside the US.Adding it up, almost 10% of US households are looking at leaving the country, and another 10% are considering living outside the country part-time. This silent emigration is ignored by every population analyst. These would be immigrant households who plan to spend an average of $260,000 on the purchase or construction of a house, and they plan to spend at least $6,000 annually on living expenses outside the US. The largest group to relocate is in the households that are 25-34 years old. These are the buyers and doers. This does not bode well for America.
In Oregon, as in many locales throughout America, the influx of Mexican immigrants has caused public schools to adapt a new technique in teaching students. Oregon high schools are adapting Mexico’s public school curriculum to help educate Spanish-speaking students with textbooks, on on-line Websites, DVD’s and CD’s, provided free by Mexico to teach math, science and even US history. The curriculum is to be aligned so courses will be void in both countries. This is another example of harmonization on the way to amalgamation under the North American Union. The schools using such a program have become less Americanized more Mexicanized. The program is to placate those in America who intend to remain Mexicans no matter how long they remain in the US, or how much money American taxpayers are forced to lavish on their education. If you point out such unfair issues in discussing illegal aliens you are a racist, a bigot, a xenophobe or a vigilante. This is part of the cultural destruction of America by the Illuminati in order for them to more easily control the people. It is known as culture distortion. America is being transformed into an alien land without the consent of Americans. We are at a serious stage and highlight the need to consider a complete halt to all immigration. People come by and large to America to make money and often to return home not to partake in America’s culture.
The dollar is now 40% of its 1971 level. Overall, the dollar index has fallen at a rate of 4.8% a year in Bush’s years in office, considerably more than the previous record of 2.7% a year during the Carter years.