The nation's economic pulse is starting to beat more powerfully, but it's still too soon to crack open the champagne, President Obama noted Thursday after new numbers showed the economy grew in the third quarter.
The nation's economic pulse is starting to beat more powerfully, but it's still too soon to crack open the champagne, President Obama noted Thursday after new numbers showed the economy grew in the third quarter.
The gross domestic product grew at an annual rate of 3.5 percent, up from a 0.7 percent drop in the second quarter, and "the largest three-month gain we have seen in two years," Obama said at a small business event Thursday.
"This is obviously welcome news and an affirmation that this recession is abating and the steps we've taken have made a difference."
But persistently dismal jobless numbers still dampen any talk of a full recovery in the near future. The Labor Department reported Thursday that weekly numbers for newly laid-off workers fell by 1,000 to a seasonally-adjusted 530,000, less than than the 521,000 government economists had expected.
House Minority Leader John Boehner indicated that's the true measure of recovery.
"I'm pleased that the GDP numbers this morning were up. But the question is, where are the jobs?" he asked.
That's also a sentiment the administration has openly expressed and the president revisited Thursday. "The benchmark I use to measure the strength of our economy is not just whether our GDP is growing, but whether we are creating jobs, whether families are having an easier time paying their bills, whether our businesses are hiring and doing well."
The economy's personal impact on Americans has been the central concern of administration critics, who say people don't feel the economic downturn in abstract GDP terms. They feel it, they say, in their paychecks, or lack thereof.
The administration has tried to show it recognizes this. In remarks to a House hearing Thursday, Treasury Secretary Tim Geithner said the situation on American families is "alive and acute."
Still, compounding Republican concerns is the health care reform bill touted by House Speaker Nancy Pelosi Thursday.
"This bill right here, the Pelosi health care bill, will do nothing more than to kill millions more American jobs," said Boehner, R-Ohio.
Council of Economic Advisers Chair Christina Romer chose to look to the horizon.
"The turnaround in crucial labor market indicators, such as employment and the unemployment rate, typically occurs after the turnaround in GDP."
Friday, October 30, 2009
Anything Less Than Full Disclosure is Unacceptable
Ron Paul
Texas Straight Talk
October 30, 2009
Last week a new bill was introduced in the Senate to audit the Federal Reserve. Some backers of my bill HR1207 and the existing Senate companion bill S.604 were a little miffed at this, but depending on how you think about it, this new legislation poses no great threat to our efforts.
election politics Anything Less Than Full Disclosure is Unacceptable
vaccine
There is still very powerful resistance to the disclosures that HR 1207 would require and efforts to weaken it will continue to pop up before this issue is settled.
With the economy in shambles, people are looking for answers – not just because of lost savings on Wall Street, but because of lost houses on Main Street. Because of the many problems we face, the Federal Reserve and its powers over the economy have come under scrutiny. This translates into a lot of political pressure on Congress. With all the House Republicans signed on as co-sponsors and over half of the Democrats, HR 1207 has enormous bipartisan support. It would be disingenuous for Washington not to embrace the principles behind this bill after all the promises for transparency. How can one credibly argue for more transparency in government in one breath and defend the secrecy of the Federal Reserve in the next?
However, there is still very powerful resistance to the disclosures that HR 1207 would require and efforts to weaken it will continue to pop up before this issue is settled.
The good news is that Washington is responding and the Federal Reserve has become the issue. Concerned Americans need to keep the pressure on by continuing to define what we want, and what we do not want.
One major concern is that HR 1207 constitutes some kind of power grab for Congress. Congress would not do a better job dictating interest rates or managing money supply growth than the Federal Reserve does for exactly the same reasons: Congress is not the free market. Any select group of people, no matter how wise and educated, simply cannot replace the wisdom of the market. HR 1207 does not seek to replace the wisdom of the Fed with the wisdom of Congress. That would be a giant step backwards. HR 1207 simply asks for full disclosure, and I am agreeable to allowing for a reasonable lag time to calm the fears that Congress intends to dictate monetary policy.
What we do want, what we insist upon, is that no longer will decisions that carry so much economic weight be made in absolute secrecy. We want to know what arrangements the Fed makes with other governments and central banks. We want to know who is benefitting from the actions of the Fed and what deals are being made. The Fed is already reacting to pressure by scaling back its liquidity facilities and returning to more traditional monetary policy through direct asset purchases. With nearly $800 billion in mortgage-backed securities on its books already, $800 billion in Treasury securities, and no real limit to what the Fed can acquire, there is a tremendous opportunity for malfeasance. We need to know who the Fed deals with, what they buy, how much they spend, and who benefits. As good as any step towards Federal Reserve transparency is, anything less than full disclosure at this point is unacceptable.
Texas Straight Talk
October 30, 2009
Last week a new bill was introduced in the Senate to audit the Federal Reserve. Some backers of my bill HR1207 and the existing Senate companion bill S.604 were a little miffed at this, but depending on how you think about it, this new legislation poses no great threat to our efforts.
election politics Anything Less Than Full Disclosure is Unacceptable
vaccine
There is still very powerful resistance to the disclosures that HR 1207 would require and efforts to weaken it will continue to pop up before this issue is settled.
With the economy in shambles, people are looking for answers – not just because of lost savings on Wall Street, but because of lost houses on Main Street. Because of the many problems we face, the Federal Reserve and its powers over the economy have come under scrutiny. This translates into a lot of political pressure on Congress. With all the House Republicans signed on as co-sponsors and over half of the Democrats, HR 1207 has enormous bipartisan support. It would be disingenuous for Washington not to embrace the principles behind this bill after all the promises for transparency. How can one credibly argue for more transparency in government in one breath and defend the secrecy of the Federal Reserve in the next?
However, there is still very powerful resistance to the disclosures that HR 1207 would require and efforts to weaken it will continue to pop up before this issue is settled.
The good news is that Washington is responding and the Federal Reserve has become the issue. Concerned Americans need to keep the pressure on by continuing to define what we want, and what we do not want.
One major concern is that HR 1207 constitutes some kind of power grab for Congress. Congress would not do a better job dictating interest rates or managing money supply growth than the Federal Reserve does for exactly the same reasons: Congress is not the free market. Any select group of people, no matter how wise and educated, simply cannot replace the wisdom of the market. HR 1207 does not seek to replace the wisdom of the Fed with the wisdom of Congress. That would be a giant step backwards. HR 1207 simply asks for full disclosure, and I am agreeable to allowing for a reasonable lag time to calm the fears that Congress intends to dictate monetary policy.
What we do want, what we insist upon, is that no longer will decisions that carry so much economic weight be made in absolute secrecy. We want to know what arrangements the Fed makes with other governments and central banks. We want to know who is benefitting from the actions of the Fed and what deals are being made. The Fed is already reacting to pressure by scaling back its liquidity facilities and returning to more traditional monetary policy through direct asset purchases. With nearly $800 billion in mortgage-backed securities on its books already, $800 billion in Treasury securities, and no real limit to what the Fed can acquire, there is a tremendous opportunity for malfeasance. We need to know who the Fed deals with, what they buy, how much they spend, and who benefits. As good as any step towards Federal Reserve transparency is, anything less than full disclosure at this point is unacceptable.
Facing A Total Breakdown Of Financial Markets
Bob Chapman
The International Forecaster
October 30, 2009
Early Friday morning, state and federal agents walked into the Bank of Elmwood and closed the failed 49-year-old independent bank after a year of struggling to improve a bleak financial situation, officials announced Friday.
featured stories Facing A Total Breakdown Of Financial Markets
gore
We have entered a phase where the Fed and the US Treasury recognize that they can no longer hold up the dollar.
The Wisconsin Department of Financial Institutions shut down the bank and turned it over to the Federal Deposit Insurance Corporation. The FDIC in turn sold it to an Oak Creek-based bank.
The FDIC entered into an agreement with the Oak Creek-based Tri City National Bank to assume all of the Bank of Elmwood deposits and assets.
As of Sept. 30, 2009, Bank of Elmwood had total assets of $327.4 million and total deposits of approximately $273.2 million.
No advance notice of the closing was given, according to FDIC officials.
Stock funds have had net outflows of capital out of the market for the past six weeks. Insiders at corporations are selling with glee. Thirty times more sell orders than buy orders. Even CALPERS, the world’s fourth largest pension fund has cut equity holdings to 49%, the lowest since 1993. British pensions have the lowest equity holdings in 35 years. This leads us to believe that, due to the character of pension plans, that long-term momentum has changed and will remain more conservative for some time to come. They could cut back much further and we may not see them on the long side in a big way until a bottom is reached and a decisive uptrend is in place. It is no wonder US Treasures are so strong. We know fiduciaries are perpetually wrong, but irrespective the trend for whatever reason is for less participation in the equity market. Maybe for once they are being smart and following the insiders who are selling 30 times more than they are buying. A recent example was the CEO of one of our short recommendations, Robert Toll, of Toll Brothers, a homebuilder, who last month sold 1.6 million shares of his company’s stock. Stock repurchases are off 65% as well.
During September and October we still saw short covering. We also see that 73% of NYSE trading was of the black box variety, program trading. There are 16 firms front-running all market trades and the SEC refuses to do anything about it, so that Goldman Sachs and JP Morgan chase can further enrich themselves, illegally. The SEC calls it flash-trading not what it really is, stealing. And, yes, the SEC still refuses to stop naked shorting, which is also illegal – another trove of riches for the anointed insiders at Illuminati run brokerage firms. The remainder of the market strength comes from banks, brokerage firms and insurance companies who are leveraging funds received from the Treasury and the Fed, some $12.7 trillion. That is what this really is all about.
This is the first time ever that the S&P 500 has ever rallied 60% in six months. The Dow reached 10,000, when it should not have exceeded 8,500. That shows you the distortion and manipulation going on and points up the now blatant activities of the President’s “Working Group on Financial Markets,” which, of course, operates in secret. As a tribute to this phony rally we have lost 2.5 million jobs over its tenure, when two million are normally created. Are there no professionals out there that get it? They cannot all be that dumb, and they are not that dumb. They are engaging in a conspiracy of silence. They want to be thought well by their peers at the club. They do not want to be ostracized in the Wall Street click. We know we were there for 28 years, of course, always on the outside looking in, permanently known as goldie. If you want to see where the US stock market is eventually going take a look at Japan from 1992 to today. 70% losses and still unable to get out of its own way with an economy still in depression. Incidentally, if the US market copies Japan, which we believe it will, we could easily fall to 3,800 to 4,200 on the Dow and we’ll be very lucky if it holds there. Others whose opinion we respect are looking for 2,800. Wall Street is pricing into the market earnings not only for 2010 but 2011 as well, which is very dangerous in such an environment. We are still in the worst credit crisis since the 1930s.
Trailing P/E on operating earnings is 27 times. When the Dow was 14,168 in 2007, it was 18.8 times. Reported trailing earnings are 180 times, whereas in 10/07, it was 23.4 times. In 10/87, it was 20.3 times. That should give you something to think about if you are in the market. Normally P/E’s should be 14.5 times. Instead of chasing an overpriced goose you should be participating in the bull markets in gold, silver and commodities. That is where safety, preservation of capital and possible large gains are to be found, both short and long term. Why fiddle with an overextended bear market rally when you can gain in relative safety. Get rid of those bonds, stocks, CDs, cash value life insurance policies and annuities, which are really uninsured and in the stock market waiting to again fall 40% to 70% in value. The crisis is not over; it is still in the beginning.
The Fed and Wall Street tell us the recession is over and soon policy actions will continue to a gradual resumption of sustainable economic growth. They see no inflation ahead, only the 1.2% presently. Needless to say, they are well aware that real inflation is 6.11%.
We mentioned CALPERS earlier on as a seller of equities. CALPERS is closely watched by other funds and they probably will influence other pension plans to follow. The plan is to become more conservative as the boomer retirement wave hits. Worldwide retirees will jump to 1.3 billion in 2040 from 500 million plus last year. That will be 14% of the total population. It is inevitable that the market will head lower soon. Funds are not dumb, they see the trend as well and they’ll also be sellers. Now the question is when?
Most professionals, investors and the public still do not understand that we are facing a total breakdown of financial markets, which in turn will take down the economy as well, and will lead to a depression of five years or more. There are no solutions; the problem should have been attended to in 1990. After June of 2002, there was no turning back. The damage inflicted will take years to heal. Those who created the crisis, who are now supposedly trying to fix it, are playing for time. Many people are realizing what the bankers and Wall Street are up too, as bubbles deflate inflation is rising. Zero interest rates certainly do not induce people to save, although savings have risen to more than 4% of GDP, as debt is aggressively being reduced. As long as money and credit is being increased, monetization increases and no purge of the problem takes place, the economy will continue to deteriorate.
The Illuminist’s plans to destroy America are coming unglued. Their puppet in the White House has monstrous problems. Plunging approval ratings, Cap & Trade legislation being held up in the Senate, medical reform that is going nowhere, massive deficits and a stimulus package that isn’t working.
An issue the elitists did not think they would have to deal with is the question of whether Obama is a citizen or not. They thought they would be able to bamboozle the public. That question has become a cause celebre. Thus, if the President’s controllers want to dump him it will be easy. They will just make sure it is finally discovered he was born in Kenya. Then it is game over. The failure of Obama will further force the Illuminists to cut back on their plans for a new world order. They will try their best to extend the time frame. The dollar devaluation, rising unemployment that brings social problems, or a breakdown in society will be avoided at all costs. This means more and bigger injections of money and credit, more monetization, more stimulus and more subsidies. That means we definitely will have hyperinflation and a falling dollar. That means gold and silver will go higher. That could mean an abandonment of a green policy, and the failure of Cap & Trade, healthcare reform and Copenhagen. We will have to see how things develop.
From here on out the Fed isn’t going to get away with anything. Anyone who has been in the market for any length of time knows all of our current problems emanated straight from the fed. It is now obvious that the take down of the dollar is deliberate and there is little effort to save it; just an effort to bring it down slowly and incrementally. There is no question banks will continue to get cheap loans and either deposit the money with the Fed for a 3% gain to buy Treasuries or opportune the markets. An increase in interest rates is a year or more off. Higher rates mean a collapse not only in the economy, but in credit derivatives as well – some $600 billion worth. Besides who wants mortgage rates back up to 6-1/2% to 7%? That would send housing prices lower and unsold inventories higher and that would destroy bank balance sheets. That also means the phantom inventory would become much more visible. That would collapse many banks. We say no change in rates for a year or more. Next enters the dollar carry trade and once it ends the dollar will collapse and that should coincide with the official dollar devaluation, default and bank holiday. It is no wonder foreigners are issuing bonds in US dollars to capture the depreciation. Eventually this will lead to US tariffs on goods and services and trade war. It will also bring an end to the fraud and monetization. Either the US purges their financial system or no one will accept dollars. That is when monetization will finally end.
Is it any wonder some nations are buying gold, particularly China. We now have a Chinese put on gold just as the US stock market once had a Greenspan put to keep it at ridiculously high levels. The Chinese are working with an element that has been suppressed since 1968. We now know that from documents released via the FOIA. We saw it in secret gold sales in 1987 via London. Then we were subject to the President’s “Working Group on Financial Markets” since 1988. The suppression of the gold price by the US and UK all those years has made gold extremely cheap. Thus the Chinese have the perfect vehicle to dump their dollars into. Every time the US Treasury knocks gold down China and others are there as buyers.
Gold has entered phase 2, which we described in 2000. Phase 2 will carry to $2,500 to $3,000. That should be followed by phase 3 to $6,700. That will then allow gold to reflect real inflation since 1980. Needless to say, in 2000 we had no idea that China would be the propellant to move gold higher. As you know 96% of letter writers, analysts and economists have stated gold will fall below $1,000 again. They are wrong and as usual they will continue to be wrong. They cannot understand that this is psycho-political warfare and there are no rules. He who has the gold makes the rules. They all believe this is transitory and we will go back to business as usual. That is not the way it is going to be. The US is finished as an international imperial power. We wish it was otherwise, but those are the facts. The elitists who control our economies and financial system have deliberately destroyed it in order to bring about world government. Once these mallet heads understand what the game is they will realize where this is headed. Just stop and think, is it normal for a bank to leave lending at 8 to 10 to one of deposits to lend at 40 to one, as the Fed cheers them on? Of course not. Bankers know that is suicidal. So why did they do so? And, why are they still leveraged at those levels? It is because the big banks controlled by the Illuminists want the system to collapse in order to force Americans and Europeans to accept world government. If you can think of another reason let us know. These people are not stupid. They know exactly what they are doing. We wrote an article for Bull & Bear in August 1988, that described the new manipulation of the gold market, but no one was listening. Finally ten years later others discovered what we had discovered long before. Finally today many understand what the elitists are really up too. Even they though don’t understand the end game. If they do they are not writing about it.
We have entered a phase where the Fed and the US Treasury recognize that they can no longer hold up the dollar. They can only impede its downward progress. In that process US and British transnational conglomerates can make even more money by paying for goods in dollars and shorting the dollar simultaneously. This process began at the beginning of the year led by the Chinese and as a result Forex reserves of foreign central banks fell from 64.5% to 62.8% in dollar terms.
Those events have been accompanied by a flight into other currencies and gold and the use of the dollar in the carry trade. Zero US interest rates will stay at that level indefinitely irrespective of the inflation that will rage in the US and be transported worldwide. Once the dollar falls to long-term support at 71.18 to 72 on the USDX, there will probably be a rally and a retest. Sometime in 2010, 71.18 will be broken to the downside and we will then find out where the real bottom on the dollar will be. It could be 40 to 55, we won’t know until we get there. That is when official devaluation and default will occur, not only in the US dollar but in many other currencies. That will cause financial chaos worldwide and you had better have gold and silver if you want to survive.
The International Forecaster
October 30, 2009
Early Friday morning, state and federal agents walked into the Bank of Elmwood and closed the failed 49-year-old independent bank after a year of struggling to improve a bleak financial situation, officials announced Friday.
featured stories Facing A Total Breakdown Of Financial Markets
gore
We have entered a phase where the Fed and the US Treasury recognize that they can no longer hold up the dollar.
The Wisconsin Department of Financial Institutions shut down the bank and turned it over to the Federal Deposit Insurance Corporation. The FDIC in turn sold it to an Oak Creek-based bank.
The FDIC entered into an agreement with the Oak Creek-based Tri City National Bank to assume all of the Bank of Elmwood deposits and assets.
As of Sept. 30, 2009, Bank of Elmwood had total assets of $327.4 million and total deposits of approximately $273.2 million.
No advance notice of the closing was given, according to FDIC officials.
Stock funds have had net outflows of capital out of the market for the past six weeks. Insiders at corporations are selling with glee. Thirty times more sell orders than buy orders. Even CALPERS, the world’s fourth largest pension fund has cut equity holdings to 49%, the lowest since 1993. British pensions have the lowest equity holdings in 35 years. This leads us to believe that, due to the character of pension plans, that long-term momentum has changed and will remain more conservative for some time to come. They could cut back much further and we may not see them on the long side in a big way until a bottom is reached and a decisive uptrend is in place. It is no wonder US Treasures are so strong. We know fiduciaries are perpetually wrong, but irrespective the trend for whatever reason is for less participation in the equity market. Maybe for once they are being smart and following the insiders who are selling 30 times more than they are buying. A recent example was the CEO of one of our short recommendations, Robert Toll, of Toll Brothers, a homebuilder, who last month sold 1.6 million shares of his company’s stock. Stock repurchases are off 65% as well.
During September and October we still saw short covering. We also see that 73% of NYSE trading was of the black box variety, program trading. There are 16 firms front-running all market trades and the SEC refuses to do anything about it, so that Goldman Sachs and JP Morgan chase can further enrich themselves, illegally. The SEC calls it flash-trading not what it really is, stealing. And, yes, the SEC still refuses to stop naked shorting, which is also illegal – another trove of riches for the anointed insiders at Illuminati run brokerage firms. The remainder of the market strength comes from banks, brokerage firms and insurance companies who are leveraging funds received from the Treasury and the Fed, some $12.7 trillion. That is what this really is all about.
This is the first time ever that the S&P 500 has ever rallied 60% in six months. The Dow reached 10,000, when it should not have exceeded 8,500. That shows you the distortion and manipulation going on and points up the now blatant activities of the President’s “Working Group on Financial Markets,” which, of course, operates in secret. As a tribute to this phony rally we have lost 2.5 million jobs over its tenure, when two million are normally created. Are there no professionals out there that get it? They cannot all be that dumb, and they are not that dumb. They are engaging in a conspiracy of silence. They want to be thought well by their peers at the club. They do not want to be ostracized in the Wall Street click. We know we were there for 28 years, of course, always on the outside looking in, permanently known as goldie. If you want to see where the US stock market is eventually going take a look at Japan from 1992 to today. 70% losses and still unable to get out of its own way with an economy still in depression. Incidentally, if the US market copies Japan, which we believe it will, we could easily fall to 3,800 to 4,200 on the Dow and we’ll be very lucky if it holds there. Others whose opinion we respect are looking for 2,800. Wall Street is pricing into the market earnings not only for 2010 but 2011 as well, which is very dangerous in such an environment. We are still in the worst credit crisis since the 1930s.
Trailing P/E on operating earnings is 27 times. When the Dow was 14,168 in 2007, it was 18.8 times. Reported trailing earnings are 180 times, whereas in 10/07, it was 23.4 times. In 10/87, it was 20.3 times. That should give you something to think about if you are in the market. Normally P/E’s should be 14.5 times. Instead of chasing an overpriced goose you should be participating in the bull markets in gold, silver and commodities. That is where safety, preservation of capital and possible large gains are to be found, both short and long term. Why fiddle with an overextended bear market rally when you can gain in relative safety. Get rid of those bonds, stocks, CDs, cash value life insurance policies and annuities, which are really uninsured and in the stock market waiting to again fall 40% to 70% in value. The crisis is not over; it is still in the beginning.
The Fed and Wall Street tell us the recession is over and soon policy actions will continue to a gradual resumption of sustainable economic growth. They see no inflation ahead, only the 1.2% presently. Needless to say, they are well aware that real inflation is 6.11%.
We mentioned CALPERS earlier on as a seller of equities. CALPERS is closely watched by other funds and they probably will influence other pension plans to follow. The plan is to become more conservative as the boomer retirement wave hits. Worldwide retirees will jump to 1.3 billion in 2040 from 500 million plus last year. That will be 14% of the total population. It is inevitable that the market will head lower soon. Funds are not dumb, they see the trend as well and they’ll also be sellers. Now the question is when?
Most professionals, investors and the public still do not understand that we are facing a total breakdown of financial markets, which in turn will take down the economy as well, and will lead to a depression of five years or more. There are no solutions; the problem should have been attended to in 1990. After June of 2002, there was no turning back. The damage inflicted will take years to heal. Those who created the crisis, who are now supposedly trying to fix it, are playing for time. Many people are realizing what the bankers and Wall Street are up too, as bubbles deflate inflation is rising. Zero interest rates certainly do not induce people to save, although savings have risen to more than 4% of GDP, as debt is aggressively being reduced. As long as money and credit is being increased, monetization increases and no purge of the problem takes place, the economy will continue to deteriorate.
The Illuminist’s plans to destroy America are coming unglued. Their puppet in the White House has monstrous problems. Plunging approval ratings, Cap & Trade legislation being held up in the Senate, medical reform that is going nowhere, massive deficits and a stimulus package that isn’t working.
An issue the elitists did not think they would have to deal with is the question of whether Obama is a citizen or not. They thought they would be able to bamboozle the public. That question has become a cause celebre. Thus, if the President’s controllers want to dump him it will be easy. They will just make sure it is finally discovered he was born in Kenya. Then it is game over. The failure of Obama will further force the Illuminists to cut back on their plans for a new world order. They will try their best to extend the time frame. The dollar devaluation, rising unemployment that brings social problems, or a breakdown in society will be avoided at all costs. This means more and bigger injections of money and credit, more monetization, more stimulus and more subsidies. That means we definitely will have hyperinflation and a falling dollar. That means gold and silver will go higher. That could mean an abandonment of a green policy, and the failure of Cap & Trade, healthcare reform and Copenhagen. We will have to see how things develop.
From here on out the Fed isn’t going to get away with anything. Anyone who has been in the market for any length of time knows all of our current problems emanated straight from the fed. It is now obvious that the take down of the dollar is deliberate and there is little effort to save it; just an effort to bring it down slowly and incrementally. There is no question banks will continue to get cheap loans and either deposit the money with the Fed for a 3% gain to buy Treasuries or opportune the markets. An increase in interest rates is a year or more off. Higher rates mean a collapse not only in the economy, but in credit derivatives as well – some $600 billion worth. Besides who wants mortgage rates back up to 6-1/2% to 7%? That would send housing prices lower and unsold inventories higher and that would destroy bank balance sheets. That also means the phantom inventory would become much more visible. That would collapse many banks. We say no change in rates for a year or more. Next enters the dollar carry trade and once it ends the dollar will collapse and that should coincide with the official dollar devaluation, default and bank holiday. It is no wonder foreigners are issuing bonds in US dollars to capture the depreciation. Eventually this will lead to US tariffs on goods and services and trade war. It will also bring an end to the fraud and monetization. Either the US purges their financial system or no one will accept dollars. That is when monetization will finally end.
Is it any wonder some nations are buying gold, particularly China. We now have a Chinese put on gold just as the US stock market once had a Greenspan put to keep it at ridiculously high levels. The Chinese are working with an element that has been suppressed since 1968. We now know that from documents released via the FOIA. We saw it in secret gold sales in 1987 via London. Then we were subject to the President’s “Working Group on Financial Markets” since 1988. The suppression of the gold price by the US and UK all those years has made gold extremely cheap. Thus the Chinese have the perfect vehicle to dump their dollars into. Every time the US Treasury knocks gold down China and others are there as buyers.
Gold has entered phase 2, which we described in 2000. Phase 2 will carry to $2,500 to $3,000. That should be followed by phase 3 to $6,700. That will then allow gold to reflect real inflation since 1980. Needless to say, in 2000 we had no idea that China would be the propellant to move gold higher. As you know 96% of letter writers, analysts and economists have stated gold will fall below $1,000 again. They are wrong and as usual they will continue to be wrong. They cannot understand that this is psycho-political warfare and there are no rules. He who has the gold makes the rules. They all believe this is transitory and we will go back to business as usual. That is not the way it is going to be. The US is finished as an international imperial power. We wish it was otherwise, but those are the facts. The elitists who control our economies and financial system have deliberately destroyed it in order to bring about world government. Once these mallet heads understand what the game is they will realize where this is headed. Just stop and think, is it normal for a bank to leave lending at 8 to 10 to one of deposits to lend at 40 to one, as the Fed cheers them on? Of course not. Bankers know that is suicidal. So why did they do so? And, why are they still leveraged at those levels? It is because the big banks controlled by the Illuminists want the system to collapse in order to force Americans and Europeans to accept world government. If you can think of another reason let us know. These people are not stupid. They know exactly what they are doing. We wrote an article for Bull & Bear in August 1988, that described the new manipulation of the gold market, but no one was listening. Finally ten years later others discovered what we had discovered long before. Finally today many understand what the elitists are really up too. Even they though don’t understand the end game. If they do they are not writing about it.
We have entered a phase where the Fed and the US Treasury recognize that they can no longer hold up the dollar. They can only impede its downward progress. In that process US and British transnational conglomerates can make even more money by paying for goods in dollars and shorting the dollar simultaneously. This process began at the beginning of the year led by the Chinese and as a result Forex reserves of foreign central banks fell from 64.5% to 62.8% in dollar terms.
Those events have been accompanied by a flight into other currencies and gold and the use of the dollar in the carry trade. Zero US interest rates will stay at that level indefinitely irrespective of the inflation that will rage in the US and be transported worldwide. Once the dollar falls to long-term support at 71.18 to 72 on the USDX, there will probably be a rally and a retest. Sometime in 2010, 71.18 will be broken to the downside and we will then find out where the real bottom on the dollar will be. It could be 40 to 55, we won’t know until we get there. That is when official devaluation and default will occur, not only in the US dollar but in many other currencies. That will cause financial chaos worldwide and you had better have gold and silver if you want to survive.
Monday, October 26, 2009
Are You Ready for the Next Crisis?
Paul Craig Roberts
Infowars
October 26, 2009
Evidence that the US is a failed state is piling up faster than I can record it.
One conclusive hallmark of a failed state is that the crooks are inside the government, using government to protect and to advance their private interests.
Another conclusive hallmark is rising income inequality as the insiders manipulate economic policy for their enrichment at the expense of everyone else.
The Banksters are still in charge.
Income inequality in the US is now the most extreme of all countries. The 2008 OECD report, “Income Distribution and Poverty in OECD Countries,” [ PDF]concludes that the US is the country with the highest inequality and poverty rate across the OECD and that since 2000 nowhere has there been such a stark rise in income inequality as in the US.
The OECD finds that in the US the distribution of wealth is even more unequal than the distribution of income.
On October 21, 2009, Business Week reported that a new report from the United Nations Development Program concluded that the US ranked third among states with the worst income inequality. As number one and number two, Hong Kong and Singapore, are both essentially city states, not countries, the US actually has the shame of being the country with the most inequality in the distribution of income.
The stark increase in US income inequality in the 21st century coincides with the offshoring of US jobs, which enriched executives with “performance bonuses” while impoverishing the middle class, and with the rapid rise of unregulated OTC derivatives, which enriched Wall Street and the financial sector at the expense of everyone else.
Millions of Americans have lost their homes and half of their retirement savings while being loaded up with government debt to bail out the banksters who created the derivative crisis.
Frontline’s October 21 broadcast, “The Warning,” documents how Federal Reserve Chairman Alan Greenspan, Treasury Secretary Robert Rubin, Deputy Treasury Secretary Larry Summers, and Securities and Exchange Commission Chairman Arthur Levitt blocked Brooksley Born, head of the Commodity Futures Trading Commission, from performing her statutory duties and regulating OTC derivatives.
After the worst crisis in US financial history struck, just as Brooksley Born said it would, a disgraced Alan Greenspan was summoned out of retirement to explain to Congress his unequivocal assurances that no regulation of derivatives was necessary. Greenspan had even told Congress that regulation of derivatives would be harmful. A pathetic Greenspan had to admit that the free market ideology on which he had relied turned out to have a flaw.
Greenspan may have bet our country on his free market ideology, but does anyone believe that Rubin and Summers were doing anything other than protecting the enormous fraud-based profits that derivatives were bringing Wall Street? As Brooksley Born stressed, OTC derivatives are a “dark market.” There is no transparency. Regulators have no information on them and neither do purchasers.
Even after Long Term Capital Management blew up in 1998 and had to be bailed out, Greenspan, Rubin, and Summers stuck to their guns. Greenspan, Rubin and Summers, and a roped-in gullible Arthur Levitt who now regrets that he was the banksters’ dupe, succeeded in manipulating a totally ignorant Congress into blocking the CFTC from doing its mandated job. Brooksley Born, prevented by the public’s elected representatives from protecting the public, resigned. Wall Street money simply shoved facts and honest regulators aside, guaranteeing government inaction and the financial crisis that hit in 2008 and continues to plague our economy today.
The financial insiders running the Treasury, White House, and Federal Reserve shifted to taxpayers the cost of the catastrophe that they had created. When the crisis hit, Henry Paulson, appointed by President Bush as Rubin’s replacement as the Goldman Sachs representative running the US Treasury, hyped fear to obtain from “our” representatives in Congress with no questions asked hundreds of billions of taxpayers’ dollars (TARP money) to bail out Goldman Sachs and the other malefactors of unregulated derivatives.
When Goldman Sachs recently announced that it was paying massive six- and seven-figure bonuses to every employee, public outrage erupted. In defense of banksters, saved with the public’s money, paying themselves bonuses in excess of most people’s life-time earnings, Lord Griffiths, Vice Chairman of Goldman Sachs International, said that the public must learn to “tolerate the inequality as a way to achieve greater prosperity for all.”[Public must learn to 'tolerate the inequality' of bonuses, says Goldman Sachs vice-chairman]
In other words, “Let them eat cake.”
According to the UN report cited above, Great Britain has the 7th most unequal income distribution in the world. After the Goldman Sachs bonuses, the British will move up in distinction, perhaps rivalling Israel for the fourth spot in the hierarchy.
Despite the total insanity of unregulated derivatives, the high level of public anger, and Greenspan’s confession to Congress, still nothing has been done to regulate derivatives.
One of Rubin’s Assistant Treasury Secretaries, Gary Gensler, has replaced Brooksley Born as head of the CFTC. Larry Summers is the head of President Obama’s National Economic Council. Former Federal Reserve official Timothy Geithner, a Paulson protege, runs the Obama Treasury. A Goldman Sachs vice president, Adam Storch, has been appointed the chief operating officer of the Securities and Exchange Commission.
The Banksters are still in charge.
Is there another country in which in full public view so few so blatantly use government for the enrichment of private interests, with a coterie of “free market” economists available to justify plunder on the grounds that “the market knows best”?
A narco-state is bad enough. The US surpasses this horror with its financo-state.
As Brooksley Born says, if nothing is done, “it’ll happen again.”
But nothing can be done. The crooks have the government.
[PCR Note: The OECD report shows that despite the Reagan tax rate reduction, the rate of increase in US income inequality declined during the Reagan years. During the mid-1990s the Gini coefficient (the measure of income inequality) actually fell. Beginning in 2000 with the New Economy (essentially financial fraud and offshoring of US jobs
Infowars
October 26, 2009
Evidence that the US is a failed state is piling up faster than I can record it.
One conclusive hallmark of a failed state is that the crooks are inside the government, using government to protect and to advance their private interests.
Another conclusive hallmark is rising income inequality as the insiders manipulate economic policy for their enrichment at the expense of everyone else.
The Banksters are still in charge.
Income inequality in the US is now the most extreme of all countries. The 2008 OECD report, “Income Distribution and Poverty in OECD Countries,” [ PDF]concludes that the US is the country with the highest inequality and poverty rate across the OECD and that since 2000 nowhere has there been such a stark rise in income inequality as in the US.
The OECD finds that in the US the distribution of wealth is even more unequal than the distribution of income.
On October 21, 2009, Business Week reported that a new report from the United Nations Development Program concluded that the US ranked third among states with the worst income inequality. As number one and number two, Hong Kong and Singapore, are both essentially city states, not countries, the US actually has the shame of being the country with the most inequality in the distribution of income.
The stark increase in US income inequality in the 21st century coincides with the offshoring of US jobs, which enriched executives with “performance bonuses” while impoverishing the middle class, and with the rapid rise of unregulated OTC derivatives, which enriched Wall Street and the financial sector at the expense of everyone else.
Millions of Americans have lost their homes and half of their retirement savings while being loaded up with government debt to bail out the banksters who created the derivative crisis.
Frontline’s October 21 broadcast, “The Warning,” documents how Federal Reserve Chairman Alan Greenspan, Treasury Secretary Robert Rubin, Deputy Treasury Secretary Larry Summers, and Securities and Exchange Commission Chairman Arthur Levitt blocked Brooksley Born, head of the Commodity Futures Trading Commission, from performing her statutory duties and regulating OTC derivatives.
After the worst crisis in US financial history struck, just as Brooksley Born said it would, a disgraced Alan Greenspan was summoned out of retirement to explain to Congress his unequivocal assurances that no regulation of derivatives was necessary. Greenspan had even told Congress that regulation of derivatives would be harmful. A pathetic Greenspan had to admit that the free market ideology on which he had relied turned out to have a flaw.
Greenspan may have bet our country on his free market ideology, but does anyone believe that Rubin and Summers were doing anything other than protecting the enormous fraud-based profits that derivatives were bringing Wall Street? As Brooksley Born stressed, OTC derivatives are a “dark market.” There is no transparency. Regulators have no information on them and neither do purchasers.
Even after Long Term Capital Management blew up in 1998 and had to be bailed out, Greenspan, Rubin, and Summers stuck to their guns. Greenspan, Rubin and Summers, and a roped-in gullible Arthur Levitt who now regrets that he was the banksters’ dupe, succeeded in manipulating a totally ignorant Congress into blocking the CFTC from doing its mandated job. Brooksley Born, prevented by the public’s elected representatives from protecting the public, resigned. Wall Street money simply shoved facts and honest regulators aside, guaranteeing government inaction and the financial crisis that hit in 2008 and continues to plague our economy today.
The financial insiders running the Treasury, White House, and Federal Reserve shifted to taxpayers the cost of the catastrophe that they had created. When the crisis hit, Henry Paulson, appointed by President Bush as Rubin’s replacement as the Goldman Sachs representative running the US Treasury, hyped fear to obtain from “our” representatives in Congress with no questions asked hundreds of billions of taxpayers’ dollars (TARP money) to bail out Goldman Sachs and the other malefactors of unregulated derivatives.
When Goldman Sachs recently announced that it was paying massive six- and seven-figure bonuses to every employee, public outrage erupted. In defense of banksters, saved with the public’s money, paying themselves bonuses in excess of most people’s life-time earnings, Lord Griffiths, Vice Chairman of Goldman Sachs International, said that the public must learn to “tolerate the inequality as a way to achieve greater prosperity for all.”[Public must learn to 'tolerate the inequality' of bonuses, says Goldman Sachs vice-chairman]
In other words, “Let them eat cake.”
According to the UN report cited above, Great Britain has the 7th most unequal income distribution in the world. After the Goldman Sachs bonuses, the British will move up in distinction, perhaps rivalling Israel for the fourth spot in the hierarchy.
Despite the total insanity of unregulated derivatives, the high level of public anger, and Greenspan’s confession to Congress, still nothing has been done to regulate derivatives.
One of Rubin’s Assistant Treasury Secretaries, Gary Gensler, has replaced Brooksley Born as head of the CFTC. Larry Summers is the head of President Obama’s National Economic Council. Former Federal Reserve official Timothy Geithner, a Paulson protege, runs the Obama Treasury. A Goldman Sachs vice president, Adam Storch, has been appointed the chief operating officer of the Securities and Exchange Commission.
The Banksters are still in charge.
Is there another country in which in full public view so few so blatantly use government for the enrichment of private interests, with a coterie of “free market” economists available to justify plunder on the grounds that “the market knows best”?
A narco-state is bad enough. The US surpasses this horror with its financo-state.
As Brooksley Born says, if nothing is done, “it’ll happen again.”
But nothing can be done. The crooks have the government.
[PCR Note: The OECD report shows that despite the Reagan tax rate reduction, the rate of increase in US income inequality declined during the Reagan years. During the mid-1990s the Gini coefficient (the measure of income inequality) actually fell. Beginning in 2000 with the New Economy (essentially financial fraud and offshoring of US jobs
World Currencies To Join In Race To The Bottom
Bob Chapman
The International Forecaster
October 26, 2009
The G-20 finance ministers meet in Scotland on November 6th and 7th, and they will all be bleating about the fall in the dollar. France started this week, and the others will follow. Their currencies are rising in value and they do not like it.
featured stories World Currencies To Join In Race To The Bottom jobs
Our government, Wall Street and many Americans are basing their future on stimulation and recovery and it isn’t going to happen. om Alex Jones. Instead he attempts to discredit what Jones says.
We expect other nations to follow, Mexico and Brazil in imposing a 2% tax on incoming funds and others will print their currencies and buy dollars to reduce the value of their currencies and at the same time buy US Treasuries that are decreasing in value. That will neutralize any benefit from the exercise. In addition, they will all scream for a strong dollar policy. By the time the meeting begins the dollar should be between 71 and 72 on the USDX, the dollar index. The weaker dollar means dollar debt will be cheaper to pay back. The big question is how long will it take for the dollar to fall to 40 to 55?
We are often asked how does today compare with the 1930s in tax revenue and government spending? In 1930-31 tax revenue fell almost 53%. It increased 250% in 1932 and tripled in 1938. Yet, growth during the 30s went nowhere. In spite of an increase of 45% in government spending during those years by 1940 GDP had not returned to the levels of 1930. In 1939 unemployment was still 17.2% and in 1940, 16.4%. This is the same monetary policy being used today that was used during the 1930s. Keynesian monetization that does not work. The only reason the depression did not continue is that FDR arranged another war, otherwise the depression could have continued indefinitely. The debt bubble of the 1920s only lasted seven years. Our present debt bubble actually began in 1978, was purged in 1982-83 and began again in 1986. It was killed in 1989 and resurrected in 1994. The bubble of 2000-2001 was replaced by our current real estate bubble in 2003, which is now in the process of deflating. The privately owned Federal Reserve engineered all this.
The current fiasco was accompanied by a shortfall in tax collections to government spending from 2003 to 2007. 2008 held its own due to cooking the books and 2009 fell almost 18%. Unless further tax increases are implemented you can expect 2009 to fall short as well. Thus, if taxes are not increased the American economy will collapse. This is harsh and tax increases will come at just the wrong time. It can in part by temporarily covered by hyperinflation, but that would be a transitory solution. 62.8% of foreign reserves are in US dollars, so as the dollar depreciates foreign debt decreases. The flip side is that there is major imported inflation, particularly in the cost of goods and services.
Present government stimulation is not going to work. It didn’t work in the 1930s and Japan has found out to its dismay that since 1992 it didn’t work for them either. Why should it work in America? The debt that has been so wantonly created is still going to be there and if taxes are not raised or costs cut, it will be even larger.
Our government, Wall Street and many Americans are basing their future on stimulation and recovery and it isn’t going to happen. This supposedly is how government is going to generate its tax revenue. All we can say is good luck.
At the G-20 and G-7 we hear about an exit strategy. A strategy that doesn’t exist. Others may raise taxes but we can assure you the US and UK will be the last to do so. They are currencies in disparate trouble. The dollar will find its real value somewhere between 40 & 55 on the USDX. The dollar will become a third world currency and as a result gold will climb to $2,500 to $3,000.
The G-20 let us know that they would be replacing the G-7 and G-8. This desperation of power to developing countries would expedite the transfer of wealth from Western nations in the third world via carbon taxation in order to lower standards to meet those of the lower tier countries. This is being done to force the first world to accept world government.
In his address to the conclave US Treasury Secretary Tim Geithner told attendees that the US was going to legislate sweeping changes to the financial system under the guise of creating greater protection for consumers and investors and to promote a more stable financial system that would relieve taxpayers of the burden of the financial crisis.
The members still want to complete the Doha trade talks that have been bogged down for four years. What the WTO is really trying to accomplish is extreme financial deregulation under the cover of trade agreements, which would undermine genuine regulation and would make the entire world a free trade zone to be further looted by transnational conglomerates. The force behind WTO deregulation is the EU and they are pushing the worst aspects of the plan.
The WTO has an agreement called the FSA, the Financial Services Agreement that explicitly applies to more than 100 countries and mandates major deregulation. Mr. Geithner worked on this plan during the Clinton administration, so his regulation statements are meant for public consumption only. Incidentally, the WTO-EU rules are virtually unknown to the US Congress.
Geithner was the one who closed the deregulation deal for the Clinton entourage as lead negotiator. He knows all about the existing agreements. He was directly instrumental in the destruction of Glass-Steagall. The whole new crowd in the Obama administration was responsible for setting up what has become the destruction of our financial system.
The present US course is to re-regulate and that is in direct opposition to what the WTO and the EU want. There will be quite a fight over this change of direction by the US, especially over the WTO, Understanding on Commitments in Financial Services, which is severe deregulation. The bottom line is Doha, the FSA, WTO and the EU have to be stopped. More deregulation is now politically unaccepted by Americans who have lost so many jobs. There obviously are two factions within the Illuminist structure fighting this out. In fact, the FSA was largely written by American Express and AIG. These are some of the inner workings behind the scenes that you never hear about. Things are never what they seem to be.
The Treasury will have major issuances next week. On Monday alone they will issue $116 billion in new notes and bills, 2, 5 & 7-year paper; plus another $30 billion in bills and $7 billion in TIFS. Tuesday will see $44 billion in 2-year notes. On the 28th, $41 billion in 5-year notes and on the 29th, $31 billion in 7-year notes. That totals $182 billion and that is disastrous.
Domestic investors are selling the rally in domestic stocks at an accelerating rate while continuing to invest overseas, and in the emerging bond bubble.
Don’t’ be deceived by Wall Street and Washington, the worst remains ahead for the economic and systemic-solvency crisis. There are no meaningful signs of business recovery, with the current depression likely to evolve into a great depression, in conjunction with the collapse of the value in the US dollar and a hyperinflation. Risks are high for these crisis’s to explode in the year ahead. The general outlook is not changed says economist John Williams.
Mortgage application fell for a second straight week with refinance loans decreasing 13.7%, the lowest since 9/11/09.
Barclays Capital hosted a private meeting yesterday with Goldman Sachs president Gary Cohn, CFO David Viniar and Global Sales and Treading co-heads David Heller and Harvey Schwartz.
How concerned are they about any new regulations on the financial industry? Not much. In a copy of the notes Barclay is putting out on the meeting, and obtained by EconomicPolicyJournal.com, Goldman told Barclay that it is educating the regulators.
Barclay advised that senior Goldman management are spending an, “exorbitant amount of time thinking about potential regulatory and policy outcomes and educating regulators and policymakers on the intricacies of financial markets.”
The only picture I can conjure up is Blankfein and company educating, Gene Sperling (”Counselor” to Geithner) who last year took in $887,727 from Goldman
Lee Sachs (Geithner’s “right hand man”) who reported more than $3 million in salary and partnership income from the hedge fund Mariner Investment Group (started by Brace Young former Goldman partner) and Gary Gensler (Head of CFTC) former Goldman partner.
The International Forecaster
October 26, 2009
The G-20 finance ministers meet in Scotland on November 6th and 7th, and they will all be bleating about the fall in the dollar. France started this week, and the others will follow. Their currencies are rising in value and they do not like it.
featured stories World Currencies To Join In Race To The Bottom jobs
Our government, Wall Street and many Americans are basing their future on stimulation and recovery and it isn’t going to happen. om Alex Jones. Instead he attempts to discredit what Jones says.
We expect other nations to follow, Mexico and Brazil in imposing a 2% tax on incoming funds and others will print their currencies and buy dollars to reduce the value of their currencies and at the same time buy US Treasuries that are decreasing in value. That will neutralize any benefit from the exercise. In addition, they will all scream for a strong dollar policy. By the time the meeting begins the dollar should be between 71 and 72 on the USDX, the dollar index. The weaker dollar means dollar debt will be cheaper to pay back. The big question is how long will it take for the dollar to fall to 40 to 55?
We are often asked how does today compare with the 1930s in tax revenue and government spending? In 1930-31 tax revenue fell almost 53%. It increased 250% in 1932 and tripled in 1938. Yet, growth during the 30s went nowhere. In spite of an increase of 45% in government spending during those years by 1940 GDP had not returned to the levels of 1930. In 1939 unemployment was still 17.2% and in 1940, 16.4%. This is the same monetary policy being used today that was used during the 1930s. Keynesian monetization that does not work. The only reason the depression did not continue is that FDR arranged another war, otherwise the depression could have continued indefinitely. The debt bubble of the 1920s only lasted seven years. Our present debt bubble actually began in 1978, was purged in 1982-83 and began again in 1986. It was killed in 1989 and resurrected in 1994. The bubble of 2000-2001 was replaced by our current real estate bubble in 2003, which is now in the process of deflating. The privately owned Federal Reserve engineered all this.
The current fiasco was accompanied by a shortfall in tax collections to government spending from 2003 to 2007. 2008 held its own due to cooking the books and 2009 fell almost 18%. Unless further tax increases are implemented you can expect 2009 to fall short as well. Thus, if taxes are not increased the American economy will collapse. This is harsh and tax increases will come at just the wrong time. It can in part by temporarily covered by hyperinflation, but that would be a transitory solution. 62.8% of foreign reserves are in US dollars, so as the dollar depreciates foreign debt decreases. The flip side is that there is major imported inflation, particularly in the cost of goods and services.
Present government stimulation is not going to work. It didn’t work in the 1930s and Japan has found out to its dismay that since 1992 it didn’t work for them either. Why should it work in America? The debt that has been so wantonly created is still going to be there and if taxes are not raised or costs cut, it will be even larger.
Our government, Wall Street and many Americans are basing their future on stimulation and recovery and it isn’t going to happen. This supposedly is how government is going to generate its tax revenue. All we can say is good luck.
At the G-20 and G-7 we hear about an exit strategy. A strategy that doesn’t exist. Others may raise taxes but we can assure you the US and UK will be the last to do so. They are currencies in disparate trouble. The dollar will find its real value somewhere between 40 & 55 on the USDX. The dollar will become a third world currency and as a result gold will climb to $2,500 to $3,000.
The G-20 let us know that they would be replacing the G-7 and G-8. This desperation of power to developing countries would expedite the transfer of wealth from Western nations in the third world via carbon taxation in order to lower standards to meet those of the lower tier countries. This is being done to force the first world to accept world government.
In his address to the conclave US Treasury Secretary Tim Geithner told attendees that the US was going to legislate sweeping changes to the financial system under the guise of creating greater protection for consumers and investors and to promote a more stable financial system that would relieve taxpayers of the burden of the financial crisis.
The members still want to complete the Doha trade talks that have been bogged down for four years. What the WTO is really trying to accomplish is extreme financial deregulation under the cover of trade agreements, which would undermine genuine regulation and would make the entire world a free trade zone to be further looted by transnational conglomerates. The force behind WTO deregulation is the EU and they are pushing the worst aspects of the plan.
The WTO has an agreement called the FSA, the Financial Services Agreement that explicitly applies to more than 100 countries and mandates major deregulation. Mr. Geithner worked on this plan during the Clinton administration, so his regulation statements are meant for public consumption only. Incidentally, the WTO-EU rules are virtually unknown to the US Congress.
Geithner was the one who closed the deregulation deal for the Clinton entourage as lead negotiator. He knows all about the existing agreements. He was directly instrumental in the destruction of Glass-Steagall. The whole new crowd in the Obama administration was responsible for setting up what has become the destruction of our financial system.
The present US course is to re-regulate and that is in direct opposition to what the WTO and the EU want. There will be quite a fight over this change of direction by the US, especially over the WTO, Understanding on Commitments in Financial Services, which is severe deregulation. The bottom line is Doha, the FSA, WTO and the EU have to be stopped. More deregulation is now politically unaccepted by Americans who have lost so many jobs. There obviously are two factions within the Illuminist structure fighting this out. In fact, the FSA was largely written by American Express and AIG. These are some of the inner workings behind the scenes that you never hear about. Things are never what they seem to be.
The Treasury will have major issuances next week. On Monday alone they will issue $116 billion in new notes and bills, 2, 5 & 7-year paper; plus another $30 billion in bills and $7 billion in TIFS. Tuesday will see $44 billion in 2-year notes. On the 28th, $41 billion in 5-year notes and on the 29th, $31 billion in 7-year notes. That totals $182 billion and that is disastrous.
Domestic investors are selling the rally in domestic stocks at an accelerating rate while continuing to invest overseas, and in the emerging bond bubble.
Don’t’ be deceived by Wall Street and Washington, the worst remains ahead for the economic and systemic-solvency crisis. There are no meaningful signs of business recovery, with the current depression likely to evolve into a great depression, in conjunction with the collapse of the value in the US dollar and a hyperinflation. Risks are high for these crisis’s to explode in the year ahead. The general outlook is not changed says economist John Williams.
Mortgage application fell for a second straight week with refinance loans decreasing 13.7%, the lowest since 9/11/09.
Barclays Capital hosted a private meeting yesterday with Goldman Sachs president Gary Cohn, CFO David Viniar and Global Sales and Treading co-heads David Heller and Harvey Schwartz.
How concerned are they about any new regulations on the financial industry? Not much. In a copy of the notes Barclay is putting out on the meeting, and obtained by EconomicPolicyJournal.com, Goldman told Barclay that it is educating the regulators.
Barclay advised that senior Goldman management are spending an, “exorbitant amount of time thinking about potential regulatory and policy outcomes and educating regulators and policymakers on the intricacies of financial markets.”
The only picture I can conjure up is Blankfein and company educating, Gene Sperling (”Counselor” to Geithner) who last year took in $887,727 from Goldman
Lee Sachs (Geithner’s “right hand man”) who reported more than $3 million in salary and partnership income from the hedge fund Mariner Investment Group (started by Brace Young former Goldman partner) and Gary Gensler (Head of CFTC) former Goldman partner.
The American Dollar: Junk Bonds
http://www.washingtonsblog.com/2009/10/it-has-got-all-hallmarks-of-financial.html
Webinar Transcript: The War on the Dollar
by Martin D. Weiss, Ph.D. 10-26-09
Fed's Money Printed Gone Absolutely Wild
http://www.moneyandmarkets.com/webinar-transcript-the-war-on-the-dollar-3-36173
Last week, I showed you the most shocking numbers I’ve seen in my lifetime:
Up until the day Lehman Brothers collapsed in September of last year, it took the Fed 5,012 days — 13 years and 8 months — to double the cash currency and reserves in the coffers of U.S. banks.
In contrast, after the Lehman Brothers collapse, it took Bernanke’s Fed only 112 days to double the size of those reserves. He accelerated the pace of bank reserve expansion by a factor of 45 to 1.
Fed's Money Printed Gone Absolutely Wild
Even the Fed’s response to the biggest emergencies of the recent past was far smaller by comparison: Before the feared Y2K crisis and after the 9/11 attacks, the Fed’s money infusions were 14 times and 25 times smaller, respectively.
Moreover, they were quickly reversed as soon as the crisis subsided.
This time, the Fed has done precisely the opposite: Despite its largest money infusion of all time in late 2008, the Fed has added still more reserves in 2009!
The end result is a massive supply of U.S. dollars, driving down their value. (See “Bernanke gone berserk.”)
And unfortunately, this is just one aspect of the U.S. government’s efforts to devalue our money, the subject of our recent webinar …
Washington’s Secret War on the Dollar:
Protect Yourself and Profit
with Martin D. Weiss and Larry Edelson
(Edited Transcript)
Martin Weiss: Welcome to our online seminar on what may well be the most urgent financial and strategic dilemma of our time — the threat to the cornerstone of our nation, the threat to the value of the U.S. dollar.
Martin and Larry
The dollar is careening toward its lowest level in history! Gold is going through the roof right now, plowing past every barrier, surging to its highest level of all time. Major oil producers all over the world are talking about abandoning the dollar as the basis for global oil contracts, right now!
Joining me today from his office in Asia is long-time Weiss Research analyst, Larry Edelson. Over the last two weeks, thousands of our readers have been joining Larry on his blog in a hot debate about the fate of the dollar.
Our readers are deeply concerned about the dollar’s current decline … how that decline could slash their wealth … and how it could impact their quality of life. They wonder when and how they will be able to save for their future, for their children and grandchildren.
They ask: Can the United States survive the decline of its currency? Could the dollar’s decline mark the end of our nation’s greatness as a world power?
And now with gold and natural resources going through the roof, they’re also asking: What should I buy today to profit from this surge?
Martin and Larry
These are not questions just for the future. They are questions we must address right now.
The dollar is already falling in value against all major currencies.
The dollar’s role as a reserve currency is already being challenged in Europe, in Asia, and in the Americas. The dollar’s day of reckoning is already here.
Larry Edelson was among the very first to warn about this day.
Throughout the 1980s and 1990s, he continually wrote that America’s massive debts will someday become unsustainable.
He consistently explained that the favorite debt solution of both Democrats and Republicans will be to pay off government debts with ever-cheaper dollars.
He repeatedly warned that, in a desperate attempt to escape the nation’s massive debt burden, Washington will literally declare war against the U.S. dollar!
He further warned that, step by step, international investors will abandon the U.S. dollar.
And perhaps most alarming of all, he wrote about the ultimate day of reckoning for the dollar — the day when foreign countries and international organizations will push aggressively to replace the dollar with a new reserve currency, ending America’s supremacy as a global economic power.
Now, each and every one of Larry’s forecasts is coming to pass. And now, other voices — some very prominent voices — are saying, in essence, the same thing Larry was writing years ago. We have tapped Weiss Research’s research department to compile the relevant expert comments made recently on C-Span, CNN, NBC News, Bloomberg, and other major sources. So let’s review them right here and now.
Announcer:
President Barack Obama
President Barack Obama has declared: “The long-term deficit and debt that we have accumulated is … unsustainable. We can’t keep on just borrowing from China or borrowing from other countries. We have to pay interest on that debt … and that means we’re mortgaging our children’s future.”
Senator Judd Gregg
Senator Judd Gregg has shown how Washington’s favorite solution is to pay its debts with cheaper dollars. “One way to solve the debt problem,” he said, “is to … devalue the dollar and … inflate the currency. That’s the cruelest tax of all.”
Fed Chairman Ben Bernanke
Fed Chairman Ben Bernanke puts it this way: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”
Jim Rogers
Jim Rogers states unequivocally: “It’s the … official policy of the central bank and the United States to … debase the currency.”
Zhou Xiaochuan
Zhou Xiaochuan, Governor of China’s Central Bank, has declared that “The costs of a dollar-dominated system to the world may have exceeded its benefits. The dollar should be replaced by a new global reserve currency.”
Even the United Nations has effectively declared war on the dollar with a new, game-changing report that recommends a new artificial reserve currency.
Martin: Larry, welcome and congratulations on your foresight! I prayed that you would be wrong. I hoped that Washington and the world would not wage this war on the dollar, that this day of reckoning would never come. But now it’s here.
I have not given up hope for the dollar or for the United States, but at the same time, I recognize that, as investors, we can’t survive on hope alone. We must be pragmatic. We have to take protective action for ourselves and our family. That’s why I’ve invited you here today, not just because you saw this coming, but more importantly, because you have helped investors convert your vision into action.
Zhou Xiaochuan
Larry Edelson: Thank you for that recognition.
Martin: What I especially want to recognize is the fact that you have demonstrated, in actual practice, that the best defense for investors is to go on the offense, to convert the dollar decline into a myriad of wealth-building opportunities. We’ll talk about some of those later. Plus, before we finish today, I trust you will be giving us specific, actionable recommendations.
Larry: Yes, I will, and I will also tell you when.
Martin: Which brings me to a fundamental timing question: All the debts the United States has today have been built up over many years. All the trends we are seeing today have been decades in the making. So I ask you: Why is this suddenly a crisis now?
Larry: These years of dollar decline you’ve seen so far are merely the prelude — the build-up — to the day of reckoning for the dollar … to the convergence of events we are now seeing today.
Martin: Show us precisely why.
Larry: Because of the convergence of four factors. First, we no longer have merely a mountain of debts. We have a volcanic eruption of debts. You saw that eruption in the form of a massive financial crisis which swept the globe just months ago. And now, you are seeing that same eruption in a different form.
Worst Deficit of All Time
Martin: In the explosion of the U.S. federal deficit!
Larry: Yes, if the U.S. federal deficit were growing by 20 percent or 30 percent or even as much as 50 percent, the pundits could have argued that it was just the continuation of a long-term trend, that it was simply more of the same.
But just in the last 12 months, the U.S. federal deficit has exploded from $454.8 billion in fiscal 2008 to $1.4 trillion in fiscal 2009.*
This year’s deficit is over three times last year’s level — and last year’s deficit was already the largest in history, in dollar terms.
Martin: That’s not just more of the same.
Larry: No, it’s a whole different ball game, a clear break with the past. That’s the first major change. Second, we’re witnessing a sea change in the global economy.
Martin: The power shift from West to East that we talked about in the Weiss Global Forum …
Larry: … which is now being reflected in the all-critical shift out of the dollar as the world’s reserve currency. Put yourself in the shoes of an international investor. Even if you can choose the right dollar investment, the falling dollar is slashing your returns. You’re fed up. You’re anxious to diversify out of the dollar. But you’re not the only one.
Central banks are doing the same. Remember: The U.S. dollar is not only the money we keep in our bank accounts or carry around in our pockets; it has also been the money foreign central banks keep in their reserves.
Martin: The dollar has been the world’s dominant reserve currency.
Larry: Exactly. Which means the world has had to take our dollars whether they liked it or not. They had no other choice. So that gave us a huge strategic advantage as a nation. Unlike all other nations, we were shielded from the consequences of our follies. We could postpone our day of reckoning. We could party, binge, and abuse … yet never suffer a hangover or side effects.
Now, that protective shield is melting away. Now, we face the danger that all our past excesses could come crashing down on us in one fell swoop. You can see that clearly in what the world’s experts are saying and what the world’s leaders are doing … as you so vividly demonstrated a moment ago. You can see it even more clearly in the dollar’s decline in currency markets.
Martin: You’ve cited two critical factors pointing to a dollar decline: the explosion in U.S. debt and, at the same time, the global shift away from the dollar by investors and central banks. But there are other forces …
Larry: Force #3 is the dollar cycle. Our work with the Foundation for the Study of Cycles, based on centuries of data, leads to the conclusion that the dollar won’t hit bottom until the end of 2012. That’s three more years of potentially traumatic declines.
Factor #4 is the hidden debts that could suddenly burst onto the scene and destabilize financial markets.
Martin: Can you be more specific?
Larry: Everyone talks about our debts to Japan or to China. But our foreign debts go far beyond that. According to the U.S. Treasury Department, our total liabilities to foreigners are now $7.9 trillion — not just to countries like China and Japan, but also to Eurozone and Latin America… not just to central banks, but also to private companies and individuals. It’s a massive mountain of foreign debts that everyone just takes for granted.
Another, even larger example of hidden debts is the true obligations of the U.S. government.
Martin: When experts talk about the “national debt,” they are referring exclusively to funded debts — the debts for which the U.S. has issued securities like Treasury bonds or agency bonds.
Larry: But there again, the problem goes far beyond that. In addition to the gargantuan funded debts you see on the government’s balance sheet, Washington has another $104 trillion in unfunded obligations.
Martin: Social Security, Medicare, Medicaid, Veteran’s benefits, government pensions.
Larry: Correct. And to make matters worse, the first wave of Baby Boomers are turning 63 this year. Washington is going to have to begin paying out that money starting now!
Martin: This helps explain why Washington is now doing something that, on the face of it, seems to be patently insane: trying to spend, borrow, and print its way out of a debt disaster.
Larry: And why I see a convergence of forces toppling the dollar. It all comes down to what President Obama himself admitted: The debts our country has racked up are unsustainable. Or more to the point, they are patently unpayable. It will simply be impossible for our government to ever get out of debt by any conventional means.
Martin: But do you really believe the government is going to take radical measures to make the debts go away?
Larry: Why is that so surprising? Haven’t they already taken radical steps — steps that no one would have ever imagined possible just a few years ago? Look at how they bailed out Bank of America, Citigroup, Merrill Lynch, and AIG. Look at the trillions they poured out in loans, investments, and credit guarantees. Look how they’ve given the Fed new superpowers.
Martin: But now Mr. Bernanke and Mr. Geithner are claiming victory. They’re saying that the crisis is over and that all those extraordinary measures were a necessary evil.
Larry: They have indeed eased the debt crisis, but only by creating still another crisis — the dollar crisis, which is just beginning. Yet they haven’t made a dent in the mammoth problem that gave rise to the crisis in the first place —overwhelming, burdensome debts. All told, each and every household in America is now indirectly responsible for over $1 million in government debts and obligations.
Zhou Xiaochuan
We’ve got the officially recognized national debt at $11.8 trillion … unfunded national obligations of $104 trillion … another $9 trillion in cumulative deficits over the next 10 years … plus another trillion dollars for health care reform, no matter what bill finally makes it through Congress. Grand total: $125.8 trillion.
Imagine the government could somehow pay off that debt at the rate of $100 million per day, every day starting right now. Even at that rate, it would take 3,446 years before the total government debts and obligations are paid off …
Martin: … assuming no new government spending, no new social programs, no new wars, no new economic disasters or bailouts, no new deficits in the meantime …
Larry: … which, as we know, is a pipe dream. Even the White House admits we’re looking down the barrel of one-trillion-dollar deficits for years to come. That’s why I say that, no matter how you look at it, this debt mountain is patently unpayable. It will never be paid off, other than through some form of default.
Martin: Could you explain that please?
Larry: There are two ways a government can default on its obligations: The first way is simply to stop paying its bills and obligations. That’s highly unlikely, for obvious reasons. The second is to default on the sly — by paying off creditors with cheaper dollars, dollars that have less buying power.
But this is not just theory. It’s practice. And the idea of debasing the currency in order to delay a debt collapse certainly was not invented by Washington. Time after time, history shows us that when a government cannot print money fast enough to overcome its exploding debt burden, it has no choice but to take more drastic steps to slash the value of its money.
Martin: Let’s take a quick peek at that history.
Announcer: Since the dawn of civilization, every major nation that has been saddled with unpayable debts and obligations has ultimately resorted to currency devaluations in some form.
In ancient Rome, the Roman denarius was the dominant currency not only of the Roman Empire but even beyond its borders. But when Rome began to fall, so did its currency.
Zhou Xiaochuan
From its heights in the fourth century A.D., the Roman denarius plunged to 1/50 of its former value — in just 13 short years … and then ceased to exist.
Zhou Xiaochuan
Later, during the Byzantine Empire, their money was, in many aspects, the world’s reserve currency for 1,000 years. But in the 12th century, when the empire began to suffer under the weight of overwhelming, unpayable debts and obligations, it was also devalued by reducing its gold content until it effectively ceased to exist in the 14th century.
Zhou Xiaochuan
More recently, the fate of the British Empire and the fate of the British pound were also intertwined. In the late 19th century, London devalued pound sterling and then did it again in the early 20th century. From its heyday at the height of the Empire to its low point in recent years, the pound ultimately gave up 80 percent of its value.
So you can see that this is a well chartered path: The rise and fall of empires; the rise and fall of their currencies. What is most alarming, though, is what happens when countries lose all semblance of discipline and when they are ultimately punished by market panics.
Zhou Xiaochuan
In Germany after World War I, the government printed money in massive quantities to repay war loans and reparations with worthless currency — and to help industrialists to pay back their own loans. The reichsmark plunged from 4.2 to the U.S. dollar at the outbreak of World War I to 1 million per dollar by August 1923 … and then to as low as three trillion to 1 in the final panic before the rise of the Nazi regime.
Larry: Now let’s look at the current era: In the past 10 years, the dollar has progressively lost 36 percent of its value against other major currencies and 75 percent of its value against gold. And in the years to come, it’s bound to lose much more. I repeat: A wholesale currency devaluation is the only politically expedient way to address a debt crisis as massive as we face today. Bush, Obama, and Bernanke have already committed us to this path.
Martin: Can you give us evidence of that?
Larry: Evidence? Are you kidding? Look at last year when the U.S. economy was threatened by systemic risk from the credit crisis. Bush and Bernanke were faced with two simple choices: Either to step aside and allow a sudden, savage depression … or to spend countless sums that the government didn’t have — that it would have to borrow and print, that would almost surely lead to a future erosion in the value of our money. They chose the latter. They chose to sacrifice our future for the expedience of the present.
And this year, when faced with similar choices, the Obama team did the same. They spent hundreds of billions of TARP money. They passed a second stimulus bill AND a $300 billion omnibus spending bill. And then, just for good measure, they bailed out the automakers.
There’s your evidence: Two very different presidents — one, Republican, one Democrat — choosing the same path, the only politically viable path, the easy way out.
Both presidents chose to fight the impending depression by borrowing and printing money … while both knew full well that this has set us up for what could be an even more devastating future crisis — the crisis of the dollar, the crisis of inflation.
Martin: Which is actually worse in some respects, isn’t it?
Larry: This isn’t just an economic discussion we’re having here. It has real and dramatic consequences for everybody listening to us right now. When the value of a nation’s currency falls by half, its people’s money goes only half as far; their cost of living doubles.
When a currency falls 70 percent, 80 percent, 90 percent, or more as in the examples we just looked at, the people who earn it have to pay up to 10 times more for many of life’s necessities — food, energy, and more.
The saddest victims are folks on fixed incomes, who worked, scrimped, and saved for a lifetime to ensure they’d have enough to live on in retirement. Suddenly, the nest egg they thought would provide a comfortable life is barely enough to keep body and soul together.
Any way you look at it, this kind of currency devaluation is like government-sponsored theft.
Martin: Like a burglar who slips undetected into your home and picks up your spare change — every night, 7 days a week, 365 days a year.
Larry: Unfortunately, the majority of savers and investors don’t have a clue. They don’t believe it can happen … that it is happening right now. John Maynard Keynes said it all 79 years ago: “By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose.”
In public, Washington will never admit to it, but both President Obama and Fed Chairman Bernanke are actively waging their secret war on the dollar right now as we speak. And as an investor, you have no choice but to take defensive steps starting immediately.
Zhou Xiaochuan
Martin: Name those steps.
Larry: Step one, at a bare minimum, I believe that everyone should put 10 percent of their investment portfolio in gold and gold-related securities.
Martin: And how much would be too much?
Larry: Even if you want to be aggressive, I would not go beyond 25 percent. There are too many other contra-dollar opportunities you’d be missing.
Martin: Suppose I have, say, $500,000 in stocks, bonds, and other liquid investments. Please give me a more precise breakdown.
Larry: Each investor needs to take a look at his or her individual investment needs. There’s no such thing as a one-size-fits-all portfolio. But let’s assume the 10 percent.
You’d have $50,000 in the gold sector. Of that $50,000, I’d put about $3,100 in bullion, in ingots, or in bullion coins like the American Eagle or Canadian Maple Leaf. Given the storage hassles and costs, there’s no need to put more than that in bullion.
I’d put another $3,100 into the SPDR Gold Trust ETF, symbol GLD, and another $3,100 into each of three favorite gold mutual funds: the Tocqueville Gold Fund (TGLDX), the U.S. Global Investors World Precious Minerals Fund (UNWPX), and the U.S. Global Investors Gold and Precious Metals Fund (USERX). Then, I’d put the rest into my top-rated gold mining shares.
Martin: How high do you think gold could go?
Zhou Xiaochuan
Larry: I have three gold price scenarios. First, I believe that, no matter what, gold is going to hit its inflation-adjusted high of $2,300 an ounce — at a minimum. But that assumes an orderly decline in the dollar and an orderly process of phasing in a new world reserve currency of some kind.
In scenario two, that process is more chaotic and muddied, with rising global uncertainty regarding the outcome. In that scenario, despite sharp pullbacks, you could see gold reaching $3,000 an ounce.
Martin: Many people think $1,000 an ounce is already very high.
Larry: Adjusted for inflation, gold at $1,000 per ounce is actually selling at less than half its all-time high. Moreover, at $1,000 an ounce, gold investors are banking on an orderly transition to a new reserve currency over many years. That’s highly unlikely, in my opinion.
In scenario three, markets take over, panic sets in, and investors lose any semblance of trust in process of transitioning to a new reserve currency.
Martin: How far do you think gold could go in that scenario?
Larry: In that scenario, all bets are off! The dollar could overshoot dramatically to the downside, while gold and other natural resources could overshoot dramatically to the upside. I wouldn’t be shocked to see $5,000 an ounce for gold.
So in my lowest scenario for gold prices, I think your bullion has the potential to double. And in a worst-case scenario for the dollar, you could be looking at a 5-to-1 gain on your bullion positions.
Martin: All this is about step 1, investing in gold. What about step 2?
Larry: Step 2 is to diversify beyond gold to other natural resources. Washington’s war on the dollar will drive up a wide range of tangible assets — and companies backed by those assets. Assets that have intrinsic value and assets where the dollar crisis is manifesting itself!
Look, over the last decade we’ve seen tech companies go bust. We’ve seen the leveraged mortgage markets go bust. And we’ve seen the financial sector collapse. So savvy money now wants tangible assets and resources that provide the world with the basic necessities of life. It’s where people like Jimmy Rogers are investing. It’s where surviving hedge funds are going. And most important in my opinion, it’s where the giant sovereign wealth funds are shifting a lot of their money, especially China’s.
That gives you a double tailwind to propel your investments: Resource companies propelled higher by (a) the falling dollar and (b) the demand from China and other Asian countries.
Already, Beijing has quadrupled its gold reserves. And already, Beijing is gobbling up copper like there’s no tomorrow. China is buying oil and oil reserves, cutting deals left and right all over the world, scooping up natural resource companies and investments. It’s not just a strategic ploy to secure supplies. It’s also a hedge against the decline of the dollar.
Martin: And this is having an impact on commodity prices.
Larry: A huge impact! Beijing has $2.14 trillion of cash in the kitty, and most of that cash is now in dollars, which are falling. They cannot liquidate those investments all at once. But they can shift progressively over time. At the same time, China desperately needs those natural resource supplies to feed its rapidly growing economy and the rising lifestyles of 1.3 billion people.
Martin: In our Weiss Global Forum, you talked about the huge growth in China’s acquisition deals. Can you run through that again briefly for those who missed the Forum?
Zhou Xiaochuan
Larry: In 2002, China made only one deal; In 2003, 2 deals; 2004, 3 deals; 2005, 11 deals. In 2006, that more than doubled — to 25 deals; 2007, 33 deals; 2008, 53 deals.
And not only are there more deals, but the average value of each deal is growing by leaps and bounds. These figures also include related companies, like railroads that ship resources.
And they’re being done all over the world — in Brazil, Peru, Venezuela, Australia, Africa, you name it. And in virtually all commodities — from oil to soybeans, copper to lumber … from rubber, wheat, and corn to timber.
Make no mistake about this: The combination of the disappearing dollar and the huge demand for natural resources from Asia is unlike anything this planet has ever seen before.
And it is a key reason copper has surged 94.6 percent this year … oil has roughly doubled from its lows in January of this year … sugar has exploded higher, up over 70 percent … even cocoa is jumping, up over 30 percent this year.
Martin: Step three?
Larry: For funds you can afford to risk, use leverage. The more leverage you use, the more you can make …
Martin: And the more you can lose!
Larry: Of course, but if you use leverage carefully, that relatively small amount invested can potentially multiply your returns many fold.
Martin: Please give us some specific examples.
Larry: First, use no leverage whatsoever, just sitting in bullion. I am aiming for a minimum gain of about 130 percent — from $1,000 per ounce to $2,300 per ounce. Any gold you can buy for less than $1,000, consider it a bargain. That’s the first tier of your strategy — long term with leverage.
Martin: And the second tier of the strategy?
Larry: The second tier is to use the moderate leverage that’s inherent in most resource stocks. In gold mining companies, for example, you take advantage of the reserves they own, the profits they stand to make, and the fact that those profits can rise a lot faster than the price of bullion itself. No guarantees, but I think with the gold mining shares, you have the opportunity to multiply that 130 percent gain three or four times over.
Martin: For those not familiar with this, explain why the shares are more leveraged than the natural resource itself.
Larry: Say the company’s cost of mining gold is $400 per ounce. And say gold is selling for $500. What’s their profit?
Martin: $100 per ounce.
Larry: Now say gold goes up 10 percent to $550 per ounce. How much is their profit now?
Martin: $150 per ounce.
Larry: So there you have it. Price of gold — up 10 percent. Profit — up from $100 to $150, or 50 percent. For each 10 percent rise in the price of gold, the company’s earnings are rising 50 percent. That’s effectively five times leverage.
Martin: Larry, you are the founder and editor of the Real Wealth Report. And in your Real Wealth Report, you recommend a wide variety of resource investments. So beyond just citing a few examples, we have gone to our research department to compile your entire track record for the year, including all the losers. Do you have that for us?
Larry: Yes. Here are all the trades this year as of September 29.
Larry Edelson
Martin: Let’s have a look at this. In the first one, Company “A,” you have a loss of 18 percent. Then I see a series of small losers and small winners. But starting with Company “L,” it looks like you have had some excellent performance.
A 40 percent gain with Company “L.” A 127 percent gain with Company “M.” Company “N” — 152 percent gain. Then some smaller gains and small losses, but as we go down towards the bottom of the list, some more nice winners — 35 percent gain, 48 percent gain, 196 percent gain. And these are strictly with natural resource companies, correct?
Larry: Strictly their stocks, without any leverage — except the natural leverage that comes with stocks we talked about earlier.
Martin: A few important warnings I’d like to point out here. First, as with any stock market investing, there’s a risk of loss.
Larry: Yes, and if you cannot tolerate that, you should not buy stocks.
Martin: Second, if you’re playing this market strictly for the upside and it takes a big dump to the downside, you will see losers.
Larry: Yes, that can and does happen. My goal is to ride the great bear market in the dollar and its natural corollary, the great bull market in natural resources.
Martin: So if we get big downside moves in natural resources, you’re going to lose money in this strategy. And if that bull market continues as you expect …
Larry: I believe you’ll see a flood of double- and even triple-digit gains.
Martin: What do you do to protect your capital?
Larry: My entire point today is that if your capital is denominated exclusively in U.S. dollars and it does not include a strategy for protection against the falling dollar … you may be preserving it in name only. To truly preserve your capital and its purchasing power, you may decide you need to go on the offensive with this kind of strategy. Just like China is.
Martin: You haven’t really answered my question, though, about capital preservation.
Larry: I use very tight stop losses on nearly all my stock trades. Plus, one of the best ways to reduce risk is to diversify the instruments you’re investing in — not just individual stocks, but also mutual funds … not just ETFs on resources, but also ETFS on resource stocks … not just resource companies based in North America, but also resource companies all over the world … and sometimes, when needed, not just stocks that benefit from rising resource prices, but also stocks that benefit from falling resource prices.
Martin: Larry, I can see why you’re so enthusiastic. Gold has busted through the $1,035 barrier; and now there’s nothing on the charts — and nothing in the real world — that can stop it from exploding higher. Other natural resources are surging in tandem and the companies that produce them are rising even faster.
Just in one day this week, on a day that gold surged about 2 percent, resource shares surged 8 percent and more — all between the opening bell and the closing bell in one single trading day.
So thank you, Larry. I appreciate your enthusiasm. Your timing in presenting this seminar couldn’t be better. And I’m sure everyone is anxious to see your next recommendations.
And thank you, our members, for joining us today. This could be a frightening turning point in our history. But I trust that, with Larry’s help and with the help of the entire Weiss Research team, you can avoid the dangers — and profit — as Washington wages its secret war on the dollar.
Editor’s note: You can still join Larry to go for the tremendous profit potential he has so thoroughly documented in this webinar. To read his latest report and to join him before he issues a series of new recommendations next week, click here.
* The Treasury Department estimated the 2009 federal deficit at $1.58 trillion, but subsequently used accounting maneuvers to close the fiscal year with a deficit of $1.4 trillion.
Fed's Money Printed Gone Absolutely Wild
http://www.moneyandmarkets.com/webinar-transcript-the-war-on-the-dollar-3-36173
Last week, I showed you the most shocking numbers I’ve seen in my lifetime:
Up until the day Lehman Brothers collapsed in September of last year, it took the Fed 5,012 days — 13 years and 8 months — to double the cash currency and reserves in the coffers of U.S. banks.
In contrast, after the Lehman Brothers collapse, it took Bernanke’s Fed only 112 days to double the size of those reserves. He accelerated the pace of bank reserve expansion by a factor of 45 to 1.
Fed's Money Printed Gone Absolutely Wild
Even the Fed’s response to the biggest emergencies of the recent past was far smaller by comparison: Before the feared Y2K crisis and after the 9/11 attacks, the Fed’s money infusions were 14 times and 25 times smaller, respectively.
Moreover, they were quickly reversed as soon as the crisis subsided.
This time, the Fed has done precisely the opposite: Despite its largest money infusion of all time in late 2008, the Fed has added still more reserves in 2009!
The end result is a massive supply of U.S. dollars, driving down their value. (See “Bernanke gone berserk.”)
And unfortunately, this is just one aspect of the U.S. government’s efforts to devalue our money, the subject of our recent webinar …
Washington’s Secret War on the Dollar:
Protect Yourself and Profit
with Martin D. Weiss and Larry Edelson
(Edited Transcript)
Martin Weiss: Welcome to our online seminar on what may well be the most urgent financial and strategic dilemma of our time — the threat to the cornerstone of our nation, the threat to the value of the U.S. dollar.
Martin and Larry
The dollar is careening toward its lowest level in history! Gold is going through the roof right now, plowing past every barrier, surging to its highest level of all time. Major oil producers all over the world are talking about abandoning the dollar as the basis for global oil contracts, right now!
Joining me today from his office in Asia is long-time Weiss Research analyst, Larry Edelson. Over the last two weeks, thousands of our readers have been joining Larry on his blog in a hot debate about the fate of the dollar.
Our readers are deeply concerned about the dollar’s current decline … how that decline could slash their wealth … and how it could impact their quality of life. They wonder when and how they will be able to save for their future, for their children and grandchildren.
They ask: Can the United States survive the decline of its currency? Could the dollar’s decline mark the end of our nation’s greatness as a world power?
And now with gold and natural resources going through the roof, they’re also asking: What should I buy today to profit from this surge?
Martin and Larry
These are not questions just for the future. They are questions we must address right now.
The dollar is already falling in value against all major currencies.
The dollar’s role as a reserve currency is already being challenged in Europe, in Asia, and in the Americas. The dollar’s day of reckoning is already here.
Larry Edelson was among the very first to warn about this day.
Throughout the 1980s and 1990s, he continually wrote that America’s massive debts will someday become unsustainable.
He consistently explained that the favorite debt solution of both Democrats and Republicans will be to pay off government debts with ever-cheaper dollars.
He repeatedly warned that, in a desperate attempt to escape the nation’s massive debt burden, Washington will literally declare war against the U.S. dollar!
He further warned that, step by step, international investors will abandon the U.S. dollar.
And perhaps most alarming of all, he wrote about the ultimate day of reckoning for the dollar — the day when foreign countries and international organizations will push aggressively to replace the dollar with a new reserve currency, ending America’s supremacy as a global economic power.
Now, each and every one of Larry’s forecasts is coming to pass. And now, other voices — some very prominent voices — are saying, in essence, the same thing Larry was writing years ago. We have tapped Weiss Research’s research department to compile the relevant expert comments made recently on C-Span, CNN, NBC News, Bloomberg, and other major sources. So let’s review them right here and now.
Announcer:
President Barack Obama
President Barack Obama has declared: “The long-term deficit and debt that we have accumulated is … unsustainable. We can’t keep on just borrowing from China or borrowing from other countries. We have to pay interest on that debt … and that means we’re mortgaging our children’s future.”
Senator Judd Gregg
Senator Judd Gregg has shown how Washington’s favorite solution is to pay its debts with cheaper dollars. “One way to solve the debt problem,” he said, “is to … devalue the dollar and … inflate the currency. That’s the cruelest tax of all.”
Fed Chairman Ben Bernanke
Fed Chairman Ben Bernanke puts it this way: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”
Jim Rogers
Jim Rogers states unequivocally: “It’s the … official policy of the central bank and the United States to … debase the currency.”
Zhou Xiaochuan
Zhou Xiaochuan, Governor of China’s Central Bank, has declared that “The costs of a dollar-dominated system to the world may have exceeded its benefits. The dollar should be replaced by a new global reserve currency.”
Even the United Nations has effectively declared war on the dollar with a new, game-changing report that recommends a new artificial reserve currency.
Martin: Larry, welcome and congratulations on your foresight! I prayed that you would be wrong. I hoped that Washington and the world would not wage this war on the dollar, that this day of reckoning would never come. But now it’s here.
I have not given up hope for the dollar or for the United States, but at the same time, I recognize that, as investors, we can’t survive on hope alone. We must be pragmatic. We have to take protective action for ourselves and our family. That’s why I’ve invited you here today, not just because you saw this coming, but more importantly, because you have helped investors convert your vision into action.
Zhou Xiaochuan
Larry Edelson: Thank you for that recognition.
Martin: What I especially want to recognize is the fact that you have demonstrated, in actual practice, that the best defense for investors is to go on the offense, to convert the dollar decline into a myriad of wealth-building opportunities. We’ll talk about some of those later. Plus, before we finish today, I trust you will be giving us specific, actionable recommendations.
Larry: Yes, I will, and I will also tell you when.
Martin: Which brings me to a fundamental timing question: All the debts the United States has today have been built up over many years. All the trends we are seeing today have been decades in the making. So I ask you: Why is this suddenly a crisis now?
Larry: These years of dollar decline you’ve seen so far are merely the prelude — the build-up — to the day of reckoning for the dollar … to the convergence of events we are now seeing today.
Martin: Show us precisely why.
Larry: Because of the convergence of four factors. First, we no longer have merely a mountain of debts. We have a volcanic eruption of debts. You saw that eruption in the form of a massive financial crisis which swept the globe just months ago. And now, you are seeing that same eruption in a different form.
Worst Deficit of All Time
Martin: In the explosion of the U.S. federal deficit!
Larry: Yes, if the U.S. federal deficit were growing by 20 percent or 30 percent or even as much as 50 percent, the pundits could have argued that it was just the continuation of a long-term trend, that it was simply more of the same.
But just in the last 12 months, the U.S. federal deficit has exploded from $454.8 billion in fiscal 2008 to $1.4 trillion in fiscal 2009.*
This year’s deficit is over three times last year’s level — and last year’s deficit was already the largest in history, in dollar terms.
Martin: That’s not just more of the same.
Larry: No, it’s a whole different ball game, a clear break with the past. That’s the first major change. Second, we’re witnessing a sea change in the global economy.
Martin: The power shift from West to East that we talked about in the Weiss Global Forum …
Larry: … which is now being reflected in the all-critical shift out of the dollar as the world’s reserve currency. Put yourself in the shoes of an international investor. Even if you can choose the right dollar investment, the falling dollar is slashing your returns. You’re fed up. You’re anxious to diversify out of the dollar. But you’re not the only one.
Central banks are doing the same. Remember: The U.S. dollar is not only the money we keep in our bank accounts or carry around in our pockets; it has also been the money foreign central banks keep in their reserves.
Martin: The dollar has been the world’s dominant reserve currency.
Larry: Exactly. Which means the world has had to take our dollars whether they liked it or not. They had no other choice. So that gave us a huge strategic advantage as a nation. Unlike all other nations, we were shielded from the consequences of our follies. We could postpone our day of reckoning. We could party, binge, and abuse … yet never suffer a hangover or side effects.
Now, that protective shield is melting away. Now, we face the danger that all our past excesses could come crashing down on us in one fell swoop. You can see that clearly in what the world’s experts are saying and what the world’s leaders are doing … as you so vividly demonstrated a moment ago. You can see it even more clearly in the dollar’s decline in currency markets.
Martin: You’ve cited two critical factors pointing to a dollar decline: the explosion in U.S. debt and, at the same time, the global shift away from the dollar by investors and central banks. But there are other forces …
Larry: Force #3 is the dollar cycle. Our work with the Foundation for the Study of Cycles, based on centuries of data, leads to the conclusion that the dollar won’t hit bottom until the end of 2012. That’s three more years of potentially traumatic declines.
Factor #4 is the hidden debts that could suddenly burst onto the scene and destabilize financial markets.
Martin: Can you be more specific?
Larry: Everyone talks about our debts to Japan or to China. But our foreign debts go far beyond that. According to the U.S. Treasury Department, our total liabilities to foreigners are now $7.9 trillion — not just to countries like China and Japan, but also to Eurozone and Latin America… not just to central banks, but also to private companies and individuals. It’s a massive mountain of foreign debts that everyone just takes for granted.
Another, even larger example of hidden debts is the true obligations of the U.S. government.
Martin: When experts talk about the “national debt,” they are referring exclusively to funded debts — the debts for which the U.S. has issued securities like Treasury bonds or agency bonds.
Larry: But there again, the problem goes far beyond that. In addition to the gargantuan funded debts you see on the government’s balance sheet, Washington has another $104 trillion in unfunded obligations.
Martin: Social Security, Medicare, Medicaid, Veteran’s benefits, government pensions.
Larry: Correct. And to make matters worse, the first wave of Baby Boomers are turning 63 this year. Washington is going to have to begin paying out that money starting now!
Martin: This helps explain why Washington is now doing something that, on the face of it, seems to be patently insane: trying to spend, borrow, and print its way out of a debt disaster.
Larry: And why I see a convergence of forces toppling the dollar. It all comes down to what President Obama himself admitted: The debts our country has racked up are unsustainable. Or more to the point, they are patently unpayable. It will simply be impossible for our government to ever get out of debt by any conventional means.
Martin: But do you really believe the government is going to take radical measures to make the debts go away?
Larry: Why is that so surprising? Haven’t they already taken radical steps — steps that no one would have ever imagined possible just a few years ago? Look at how they bailed out Bank of America, Citigroup, Merrill Lynch, and AIG. Look at the trillions they poured out in loans, investments, and credit guarantees. Look how they’ve given the Fed new superpowers.
Martin: But now Mr. Bernanke and Mr. Geithner are claiming victory. They’re saying that the crisis is over and that all those extraordinary measures were a necessary evil.
Larry: They have indeed eased the debt crisis, but only by creating still another crisis — the dollar crisis, which is just beginning. Yet they haven’t made a dent in the mammoth problem that gave rise to the crisis in the first place —overwhelming, burdensome debts. All told, each and every household in America is now indirectly responsible for over $1 million in government debts and obligations.
Zhou Xiaochuan
We’ve got the officially recognized national debt at $11.8 trillion … unfunded national obligations of $104 trillion … another $9 trillion in cumulative deficits over the next 10 years … plus another trillion dollars for health care reform, no matter what bill finally makes it through Congress. Grand total: $125.8 trillion.
Imagine the government could somehow pay off that debt at the rate of $100 million per day, every day starting right now. Even at that rate, it would take 3,446 years before the total government debts and obligations are paid off …
Martin: … assuming no new government spending, no new social programs, no new wars, no new economic disasters or bailouts, no new deficits in the meantime …
Larry: … which, as we know, is a pipe dream. Even the White House admits we’re looking down the barrel of one-trillion-dollar deficits for years to come. That’s why I say that, no matter how you look at it, this debt mountain is patently unpayable. It will never be paid off, other than through some form of default.
Martin: Could you explain that please?
Larry: There are two ways a government can default on its obligations: The first way is simply to stop paying its bills and obligations. That’s highly unlikely, for obvious reasons. The second is to default on the sly — by paying off creditors with cheaper dollars, dollars that have less buying power.
But this is not just theory. It’s practice. And the idea of debasing the currency in order to delay a debt collapse certainly was not invented by Washington. Time after time, history shows us that when a government cannot print money fast enough to overcome its exploding debt burden, it has no choice but to take more drastic steps to slash the value of its money.
Martin: Let’s take a quick peek at that history.
Announcer: Since the dawn of civilization, every major nation that has been saddled with unpayable debts and obligations has ultimately resorted to currency devaluations in some form.
In ancient Rome, the Roman denarius was the dominant currency not only of the Roman Empire but even beyond its borders. But when Rome began to fall, so did its currency.
Zhou Xiaochuan
From its heights in the fourth century A.D., the Roman denarius plunged to 1/50 of its former value — in just 13 short years … and then ceased to exist.
Zhou Xiaochuan
Later, during the Byzantine Empire, their money was, in many aspects, the world’s reserve currency for 1,000 years. But in the 12th century, when the empire began to suffer under the weight of overwhelming, unpayable debts and obligations, it was also devalued by reducing its gold content until it effectively ceased to exist in the 14th century.
Zhou Xiaochuan
More recently, the fate of the British Empire and the fate of the British pound were also intertwined. In the late 19th century, London devalued pound sterling and then did it again in the early 20th century. From its heyday at the height of the Empire to its low point in recent years, the pound ultimately gave up 80 percent of its value.
So you can see that this is a well chartered path: The rise and fall of empires; the rise and fall of their currencies. What is most alarming, though, is what happens when countries lose all semblance of discipline and when they are ultimately punished by market panics.
Zhou Xiaochuan
In Germany after World War I, the government printed money in massive quantities to repay war loans and reparations with worthless currency — and to help industrialists to pay back their own loans. The reichsmark plunged from 4.2 to the U.S. dollar at the outbreak of World War I to 1 million per dollar by August 1923 … and then to as low as three trillion to 1 in the final panic before the rise of the Nazi regime.
Larry: Now let’s look at the current era: In the past 10 years, the dollar has progressively lost 36 percent of its value against other major currencies and 75 percent of its value against gold. And in the years to come, it’s bound to lose much more. I repeat: A wholesale currency devaluation is the only politically expedient way to address a debt crisis as massive as we face today. Bush, Obama, and Bernanke have already committed us to this path.
Martin: Can you give us evidence of that?
Larry: Evidence? Are you kidding? Look at last year when the U.S. economy was threatened by systemic risk from the credit crisis. Bush and Bernanke were faced with two simple choices: Either to step aside and allow a sudden, savage depression … or to spend countless sums that the government didn’t have — that it would have to borrow and print, that would almost surely lead to a future erosion in the value of our money. They chose the latter. They chose to sacrifice our future for the expedience of the present.
And this year, when faced with similar choices, the Obama team did the same. They spent hundreds of billions of TARP money. They passed a second stimulus bill AND a $300 billion omnibus spending bill. And then, just for good measure, they bailed out the automakers.
There’s your evidence: Two very different presidents — one, Republican, one Democrat — choosing the same path, the only politically viable path, the easy way out.
Both presidents chose to fight the impending depression by borrowing and printing money … while both knew full well that this has set us up for what could be an even more devastating future crisis — the crisis of the dollar, the crisis of inflation.
Martin: Which is actually worse in some respects, isn’t it?
Larry: This isn’t just an economic discussion we’re having here. It has real and dramatic consequences for everybody listening to us right now. When the value of a nation’s currency falls by half, its people’s money goes only half as far; their cost of living doubles.
When a currency falls 70 percent, 80 percent, 90 percent, or more as in the examples we just looked at, the people who earn it have to pay up to 10 times more for many of life’s necessities — food, energy, and more.
The saddest victims are folks on fixed incomes, who worked, scrimped, and saved for a lifetime to ensure they’d have enough to live on in retirement. Suddenly, the nest egg they thought would provide a comfortable life is barely enough to keep body and soul together.
Any way you look at it, this kind of currency devaluation is like government-sponsored theft.
Martin: Like a burglar who slips undetected into your home and picks up your spare change — every night, 7 days a week, 365 days a year.
Larry: Unfortunately, the majority of savers and investors don’t have a clue. They don’t believe it can happen … that it is happening right now. John Maynard Keynes said it all 79 years ago: “By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose.”
In public, Washington will never admit to it, but both President Obama and Fed Chairman Bernanke are actively waging their secret war on the dollar right now as we speak. And as an investor, you have no choice but to take defensive steps starting immediately.
Zhou Xiaochuan
Martin: Name those steps.
Larry: Step one, at a bare minimum, I believe that everyone should put 10 percent of their investment portfolio in gold and gold-related securities.
Martin: And how much would be too much?
Larry: Even if you want to be aggressive, I would not go beyond 25 percent. There are too many other contra-dollar opportunities you’d be missing.
Martin: Suppose I have, say, $500,000 in stocks, bonds, and other liquid investments. Please give me a more precise breakdown.
Larry: Each investor needs to take a look at his or her individual investment needs. There’s no such thing as a one-size-fits-all portfolio. But let’s assume the 10 percent.
You’d have $50,000 in the gold sector. Of that $50,000, I’d put about $3,100 in bullion, in ingots, or in bullion coins like the American Eagle or Canadian Maple Leaf. Given the storage hassles and costs, there’s no need to put more than that in bullion.
I’d put another $3,100 into the SPDR Gold Trust ETF, symbol GLD, and another $3,100 into each of three favorite gold mutual funds: the Tocqueville Gold Fund (TGLDX), the U.S. Global Investors World Precious Minerals Fund (UNWPX), and the U.S. Global Investors Gold and Precious Metals Fund (USERX). Then, I’d put the rest into my top-rated gold mining shares.
Martin: How high do you think gold could go?
Zhou Xiaochuan
Larry: I have three gold price scenarios. First, I believe that, no matter what, gold is going to hit its inflation-adjusted high of $2,300 an ounce — at a minimum. But that assumes an orderly decline in the dollar and an orderly process of phasing in a new world reserve currency of some kind.
In scenario two, that process is more chaotic and muddied, with rising global uncertainty regarding the outcome. In that scenario, despite sharp pullbacks, you could see gold reaching $3,000 an ounce.
Martin: Many people think $1,000 an ounce is already very high.
Larry: Adjusted for inflation, gold at $1,000 per ounce is actually selling at less than half its all-time high. Moreover, at $1,000 an ounce, gold investors are banking on an orderly transition to a new reserve currency over many years. That’s highly unlikely, in my opinion.
In scenario three, markets take over, panic sets in, and investors lose any semblance of trust in process of transitioning to a new reserve currency.
Martin: How far do you think gold could go in that scenario?
Larry: In that scenario, all bets are off! The dollar could overshoot dramatically to the downside, while gold and other natural resources could overshoot dramatically to the upside. I wouldn’t be shocked to see $5,000 an ounce for gold.
So in my lowest scenario for gold prices, I think your bullion has the potential to double. And in a worst-case scenario for the dollar, you could be looking at a 5-to-1 gain on your bullion positions.
Martin: All this is about step 1, investing in gold. What about step 2?
Larry: Step 2 is to diversify beyond gold to other natural resources. Washington’s war on the dollar will drive up a wide range of tangible assets — and companies backed by those assets. Assets that have intrinsic value and assets where the dollar crisis is manifesting itself!
Look, over the last decade we’ve seen tech companies go bust. We’ve seen the leveraged mortgage markets go bust. And we’ve seen the financial sector collapse. So savvy money now wants tangible assets and resources that provide the world with the basic necessities of life. It’s where people like Jimmy Rogers are investing. It’s where surviving hedge funds are going. And most important in my opinion, it’s where the giant sovereign wealth funds are shifting a lot of their money, especially China’s.
That gives you a double tailwind to propel your investments: Resource companies propelled higher by (a) the falling dollar and (b) the demand from China and other Asian countries.
Already, Beijing has quadrupled its gold reserves. And already, Beijing is gobbling up copper like there’s no tomorrow. China is buying oil and oil reserves, cutting deals left and right all over the world, scooping up natural resource companies and investments. It’s not just a strategic ploy to secure supplies. It’s also a hedge against the decline of the dollar.
Martin: And this is having an impact on commodity prices.
Larry: A huge impact! Beijing has $2.14 trillion of cash in the kitty, and most of that cash is now in dollars, which are falling. They cannot liquidate those investments all at once. But they can shift progressively over time. At the same time, China desperately needs those natural resource supplies to feed its rapidly growing economy and the rising lifestyles of 1.3 billion people.
Martin: In our Weiss Global Forum, you talked about the huge growth in China’s acquisition deals. Can you run through that again briefly for those who missed the Forum?
Zhou Xiaochuan
Larry: In 2002, China made only one deal; In 2003, 2 deals; 2004, 3 deals; 2005, 11 deals. In 2006, that more than doubled — to 25 deals; 2007, 33 deals; 2008, 53 deals.
And not only are there more deals, but the average value of each deal is growing by leaps and bounds. These figures also include related companies, like railroads that ship resources.
And they’re being done all over the world — in Brazil, Peru, Venezuela, Australia, Africa, you name it. And in virtually all commodities — from oil to soybeans, copper to lumber … from rubber, wheat, and corn to timber.
Make no mistake about this: The combination of the disappearing dollar and the huge demand for natural resources from Asia is unlike anything this planet has ever seen before.
And it is a key reason copper has surged 94.6 percent this year … oil has roughly doubled from its lows in January of this year … sugar has exploded higher, up over 70 percent … even cocoa is jumping, up over 30 percent this year.
Martin: Step three?
Larry: For funds you can afford to risk, use leverage. The more leverage you use, the more you can make …
Martin: And the more you can lose!
Larry: Of course, but if you use leverage carefully, that relatively small amount invested can potentially multiply your returns many fold.
Martin: Please give us some specific examples.
Larry: First, use no leverage whatsoever, just sitting in bullion. I am aiming for a minimum gain of about 130 percent — from $1,000 per ounce to $2,300 per ounce. Any gold you can buy for less than $1,000, consider it a bargain. That’s the first tier of your strategy — long term with leverage.
Martin: And the second tier of the strategy?
Larry: The second tier is to use the moderate leverage that’s inherent in most resource stocks. In gold mining companies, for example, you take advantage of the reserves they own, the profits they stand to make, and the fact that those profits can rise a lot faster than the price of bullion itself. No guarantees, but I think with the gold mining shares, you have the opportunity to multiply that 130 percent gain three or four times over.
Martin: For those not familiar with this, explain why the shares are more leveraged than the natural resource itself.
Larry: Say the company’s cost of mining gold is $400 per ounce. And say gold is selling for $500. What’s their profit?
Martin: $100 per ounce.
Larry: Now say gold goes up 10 percent to $550 per ounce. How much is their profit now?
Martin: $150 per ounce.
Larry: So there you have it. Price of gold — up 10 percent. Profit — up from $100 to $150, or 50 percent. For each 10 percent rise in the price of gold, the company’s earnings are rising 50 percent. That’s effectively five times leverage.
Martin: Larry, you are the founder and editor of the Real Wealth Report. And in your Real Wealth Report, you recommend a wide variety of resource investments. So beyond just citing a few examples, we have gone to our research department to compile your entire track record for the year, including all the losers. Do you have that for us?
Larry: Yes. Here are all the trades this year as of September 29.
Larry Edelson
Martin: Let’s have a look at this. In the first one, Company “A,” you have a loss of 18 percent. Then I see a series of small losers and small winners. But starting with Company “L,” it looks like you have had some excellent performance.
A 40 percent gain with Company “L.” A 127 percent gain with Company “M.” Company “N” — 152 percent gain. Then some smaller gains and small losses, but as we go down towards the bottom of the list, some more nice winners — 35 percent gain, 48 percent gain, 196 percent gain. And these are strictly with natural resource companies, correct?
Larry: Strictly their stocks, without any leverage — except the natural leverage that comes with stocks we talked about earlier.
Martin: A few important warnings I’d like to point out here. First, as with any stock market investing, there’s a risk of loss.
Larry: Yes, and if you cannot tolerate that, you should not buy stocks.
Martin: Second, if you’re playing this market strictly for the upside and it takes a big dump to the downside, you will see losers.
Larry: Yes, that can and does happen. My goal is to ride the great bear market in the dollar and its natural corollary, the great bull market in natural resources.
Martin: So if we get big downside moves in natural resources, you’re going to lose money in this strategy. And if that bull market continues as you expect …
Larry: I believe you’ll see a flood of double- and even triple-digit gains.
Martin: What do you do to protect your capital?
Larry: My entire point today is that if your capital is denominated exclusively in U.S. dollars and it does not include a strategy for protection against the falling dollar … you may be preserving it in name only. To truly preserve your capital and its purchasing power, you may decide you need to go on the offensive with this kind of strategy. Just like China is.
Martin: You haven’t really answered my question, though, about capital preservation.
Larry: I use very tight stop losses on nearly all my stock trades. Plus, one of the best ways to reduce risk is to diversify the instruments you’re investing in — not just individual stocks, but also mutual funds … not just ETFs on resources, but also ETFS on resource stocks … not just resource companies based in North America, but also resource companies all over the world … and sometimes, when needed, not just stocks that benefit from rising resource prices, but also stocks that benefit from falling resource prices.
Martin: Larry, I can see why you’re so enthusiastic. Gold has busted through the $1,035 barrier; and now there’s nothing on the charts — and nothing in the real world — that can stop it from exploding higher. Other natural resources are surging in tandem and the companies that produce them are rising even faster.
Just in one day this week, on a day that gold surged about 2 percent, resource shares surged 8 percent and more — all between the opening bell and the closing bell in one single trading day.
So thank you, Larry. I appreciate your enthusiasm. Your timing in presenting this seminar couldn’t be better. And I’m sure everyone is anxious to see your next recommendations.
And thank you, our members, for joining us today. This could be a frightening turning point in our history. But I trust that, with Larry’s help and with the help of the entire Weiss Research team, you can avoid the dangers — and profit — as Washington wages its secret war on the dollar.
Editor’s note: You can still join Larry to go for the tremendous profit potential he has so thoroughly documented in this webinar. To read his latest report and to join him before he issues a series of new recommendations next week, click here.
* The Treasury Department estimated the 2009 federal deficit at $1.58 trillion, but subsequently used accounting maneuvers to close the fiscal year with a deficit of $1.4 trillion.
Tuesday, October 6, 2009
Portfolio Manager Says Dow Will Fall To 6,300 By Year End
With the prospect of higher unemployment hanging over the markets, some experts expect a correction. So are they right? Michael Cuggino, president and portfolio manager at Permanent Portfolio Funds, and John Lekas, CEO and portfolio manager at Leader Capital, shared their insights. (See their recommendations, below.)
“I think we go below the double dip,” Lekas told CNBC. “By year-end, we drop below 6,300 on the Dow and by 2011, we’re at 4,200.”
Lekas said although Monday's ISM services index was “neutral,” the unemployment number was at 785,000 last month and that number is expected to worsen.
“So 26 to 27 million people who are out of work isn’t going to help the economy,” he said. “And until that number gets better, we will not see a recovery.”
“I think we go below the double dip,” Lekas told CNBC. “By year-end, we drop below 6,300 on the Dow and by 2011, we’re at 4,200.”
Lekas said although Monday's ISM services index was “neutral,” the unemployment number was at 785,000 last month and that number is expected to worsen.
“So 26 to 27 million people who are out of work isn’t going to help the economy,” he said. “And until that number gets better, we will not see a recovery.”
Monday, October 5, 2009
Friday, October 2, 2009
Thursday, October 1, 2009
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