Wednesday, March 26, 2014

The Big Reset: Jubilee or Armageddon?

Yes, there is too much debt and not enough collateral, clean collateral that is.  The common practice of rehypothecation * (some would call it stealing but let’s not get bogged down in semantics) has corrupted a very large portion of the debt that is sloshing around out there and in the final analysis the debt simply has no backing.  And it cannot be serviced at any reasonable interest rate above the current rate of zero.  This then implies that there will be a Reset, a catastrophic Reset that will shake the foundations of the global economy.
This is not a new phenomenon.  Throughout history wealth has piled up for the few while the many were saddled with debt.  Babylonian kings recognized this issue more than three thousand years ago and would on occasion decree all debts cancelled.  Talk about risk management.  How would a hedge fund manager behave if they knew the king could wipe them out on a whim?  The kings knew that if people get hopelessly in debt, no one really wins.  (The kings then were smarter than the MiLords of today)

The Hebrews codified this practice and established a timetable of once every seven sabbaticals.  A sabbatical is seven years.  A slave was deemed to be free after serving seven years, and today we “free” our professors for a year in every seven and we give them a sabbatical.  So after 49 years, Jubilee.  Property would be returned to its original family owners.  In an agrarian society, property was the equivalent of wealth.  Without it you were either a slave or a serf.

Over the centuries we lost track of this principle and relied upon a much rougher form of justice.  If things got too out of balance the peasants would rise up and chop off a head or two to get things in some sort of alignment.  For the most part wealth remained a thing measured best in land and precious metals.  At the macro level this translated into hundreds of wars being fought over land using gold to pay the workers, I mean soldiers.

And then things became quite a bit more complicated.  About a thousand years ago we developed paper wealth in the form of demand notes that stood for gold being held somewhere.  One person was holding a real piece of gold in a vault (in Jerusalem for example), another had a piece of paper representing that gold which was then given to a baker for a loaf of bread, who used the paper to buy flour and so on.  This eventually allowed for a conceptual framework to develop that evolved into what we call money. This allows a little bit of gold to support a lot of transactions.   (along the way more than one king decided they could game the system and create paper money by decree, by fiat if you will.  However,these fiat currencies with nothing behind them never stood the test of time.)

Then along came tall ships and bigger guns and a taste for spices and silver.  Explorers came back with tall tales and international trade blossomed, fostering more use of letters of credit. This led to ever more complex contracts to facilitate land and mineral exploitation, I mean trade.  The banking industry became the power center and international banking transcended business even to the point of eclipsing the emerging nation states.  Banks learned to deal in gold and take advantage of the need to pay soldiers over longer distances.  Gold speculation was profitable but the printing press was beguiling and thus began a centuries long battle to supplant gold backed currency with fiat money that they and only they could control.

Fiat currency took a real leap forward with the innovation of using debt to back the money sometimes used in tandem with gold backing.  Central Banks were born to manage debt based currency using a fractional reserve system.  The money supply could be expanded at will.  Now wealth could be accumulated and controlled on paper and laws could be drawn up to protect the system.  Reformers worked diligently to fight this insidious bastion of power but once the wealth concentration reached a certain point legislators were put firmly in pocket and the battle was essentially over.   The Federal Reserve Bank of the United States was firmly ensconced by the time Bretton Woods came along in 1944, establishing the dollar as the world’s reserve currency.  Gold, that nuisance, was still in the picture however.

Then in 1971 Nixon took the USA off the gold standard and the party began.  The binge lasted more than 40 years with most of the world’s nations subsidizing US consumption by buying US Treasuries to hold as reserves and to accomplish trade.  Petro-dollars came along and iced the deal.  To buy oil you needed dollars.  The party was a bit over the top but as time went by and greed became infectious it started to get obscene.  Before Nixon top CEO’s earned 12 times the average worker’s pay.  Today it is 450 times or more.  Billionaires abound who have done nothing more productive than shuffle some credit default swaps or manipulated the price of commodities or packaged toxic mortgage paper.

What do we have then to bring about a correction?  No Jubilee for these two thousand years or so.  We are too civilized to roll some heads, aren’t we?  The answer being discussed these days is a Reset.  A Reset is like Jubilee but without any rules for guidance.  It is a repudiation of debt and let the devil take the hindmost.  It is confiscation of bank deposits, sort of a bail in instead of a bail out (can anyone spell Cyprus?).   A Reset might require hyperinflation to bring things in line or the issuance of a new currency to replace the old.  A Reset tells all those nations holding Treasuries in reserve to go fly a kite.

What will happen after the Reset is put in place?  Nobody knows, least of all me.  I have no idea how it will be structured or how it will go down or who will be blamed (gold “hoarders” are in the running for sure for being scapegoats).  The more pressing question for some is when will this go down and what will be the trigger?  Think China.  Think Russia.  Think India.  Gold buyers all.  When?  Think Crimean Peninsula.  Think Ukrainian debts being called in.  Think of any of the dozens of black swans that are swimming in plain view.

I have been pondering the question as to whether the MiLords**(Deep State operators) that are running things have this crisis under control and will see it as no more than a bump in the road?  Will they (think Pilgrims Society) incorporate the Chinese*** elite into their program and keep on rolling the middle class soaking up all the wealth?  I am starting to think not.  I think they really did screw up this time and they really will hit a wall.  The Yuan will be the new World Reserve Currency and Russia and India will seal the deal.  Saudi Arabia will accept Petro-Yuan.  And it will come to light that Fort Knox**** is empty.  Gold nada.  The party will be over.  And to my question of an earlier post, Are MiLords Stupid? The answer is yes.  They really are.

China will sit at the head of the table for the next Bretton Woods type conference.  And when the dust settles we must be vigilant.  Just because MiLords have failed to keep the game going, doesn’t preclude them from passing the pain down the line.  That is why it is imperative to pass this message along.  People need to understand what the Reset is all about and how greed fueled it.  We cannot let chaos hide the facts about what went down.  We need to make sure that we celebrate Jubilee not suffer under Armageddon.

*  see Rehypothecation
**see MiLords Are Not United
*** Book in progress is entitled Will The Chinese Buy The Mayflower?  Or Sink It?, the Mayflower being a reference to the Pilgrims Society.
**** Fort Knox Is Empty


Saturday, March 8, 2014

Who Is In Your Network?

It’s true.  I have been telling my friends (those few who will still stand still and listen) to buy a monster box, sealed from the mint, of 500 Silver Eagles to preserve wealth.  But today I would like to focus on taking stock of our intangible assets, our friends, our neighbors, our knowhow, the sunshine that falls on our little patch, etc.  My friend David Martin calls this an audit, a taking stock of all resources that we can utilize in some way.  By doing so we can better appreciate our strengths and perhaps catalog our vulnerabilities.

In my fantasy world I would live close to the source of a pristine spring on fertile tillable land, backed by a woodshed and surrounded by sympathetic self sufficient neighbors.  Oh, with a south facing passive solar house and a cavernous root cellar.  Having dispensed of that fantasy let’s move on to the real world.

The internet is replete with lists of things to stockpile for the coming apocalypse: water, food, toilet paper, batteries… you know the drill I am sure.  Some rightly put the focus on food production as opposed to hundreds of cans in the basement.  But I would like to explore the less obvious resources we have at hand, the things around us that will matter greatly in a time of crisis.  Let’s start with family.

Family is a many splendored thing where Thanksgiving debacles and discussion minefields abound.  But for some this can be a rich resource.  A family cabin, tillable land, mechanical skills, hunting skills, canned food, a guest room far away from the big city… the list of potential resources is very long and exploring it can be illuminating.  I concede that just bringing up the subject of how to prepare for the coming challenges can open up rancorous debates, but the time will come when everyone will be more receptive and it doesn’t hurt to know what you will have available to you when the time arrives.

Another very important resource is neighbors.  You might be pleasantly surprised by what you find there if you dig a little.  On my country road I can find farmers and machinists and mechanics, all with tools and gardens.  My neighbor usually plows my driveway with a smallish tractor, while I help do the shoveling on the edges of his driveway.  But recently we had a 16” snowfall and a nearby farmer went up the road opening up driveways with his big green machine (nothing runs like a Deere) and it is a comfort to know that neighbors not right next door can still be neighborly.  What skills do you have to share with neighbors?  What skills can you be taught?  What can you do to foster a sense of community with those around you?

Sunshine, air, rain and space are all resources to be reckoned with.  Notice that I said space, not land.  Walls, rooftops, balconies, patios, yards, windowsills… we have more space than we think we do.  Get creative with the spaces you have available to you and look for ways to leverage the spaces of family, friends and neighbors.  (counting lawns and other spaces Joel Salatin claims we have 70 million acres of land that could be devoted to growing food in this country alone)

What skills do you have that matter in a local economy?  Gardening, sewing, fixing, electrical, canning, building, mechanical… are just some of the things to put on this list.  Maybe you have little to contribute but a strong back and you will need to offer that to supplement the projects of those with more tangible skills.  Maybe you need to look for courses that will better prepare you for the future.
What else do you find in your area?  What about gravity?  Falling water can grind grain and generate electricity.  What about wild berries, firewood and mushrooms?  Rocks and trees for building?  Abandoned buildings for providing workspaces for making things?  Scrap metal and junked cars?  Ponds for growing fish?  Look around and see what you see.

Yes, it can be a smart thing to stock up on dry food and Silver Eagles.  But that alone will not do the trick.  Understanding your network and taking steps to improve your network could go a long way to securing your future.

Monday, March 3, 2014

Fort Knox Is Empty

There, I have said it clearly and without equivocation.  The same can be said about the vaults in New York City, you know the ones across the street from the vaults now owned by China.  The ones connected by tunnel to the vaults now owned by China, in the building bought for a song for $750 million, about half price.  The vaults meant to be storing gold for countries like Germany who didn’t trust the Russians to invade during the Cold War.
Yes, now the gold is gone.  Leased, hypothecated, rehypothecated, sold into the market to drive down prices, … you name it.  Let me state some of the reasons why this is obvious:
  1. Gold has been pouring into China and India at a rate far higher than the mining rate, which is to say that there is not enough gold being mined to satisfy demand in those two countries let alone the rest of the world.  It had to come and is coming from somewhere.
  2. Bear Stearns failed when they couldn’t meet margin calls for gold and silver in 2008.  They were rescued.  Why?  Lehman Brothers were allowed to swing high just months later. 
  3. Now the rescuer of Bear Stearns, JP Morgan, is charged with the responsibility to drive down gold prices almost every night. 
  4. The manipulation of gold prices is being handled more and more with naked shorts and less and less with the selling of real physical gold.  April 15, 2013 may go down in history as the day the Ponzi Scheme began to unravel when 400 tons of naked shorts drove the price of gold over a cliff in a matter of minutes.  This is illegal and everybody knows it happened.  The rebound will be breath taking (as well as wealth taking).
  5. Buying and selling computer driven algorithms are being used to manipulate prices illegally.
  6. The threat of criminal prosecution was removed decades ago and stated publicly by the United States Attorney General in 2013.
  7. If you don’t have it you can’t deliver it.  COMEX is getting near the breaking point of not being able to persuade buyers to take a cash premium and forego their contract for metals deliveries.
  8. There has been no audit for more than 50 years.
  9. The Main Stream Media is ignoring a very obvious situation, including public information.
  10. The big banks are calling for gold and silver prices to remain flat for the next couple of years.  This is an intentional lie.  This is a joke to anybody with any sense of markets.  It is a ruse to lull people into a deep sleep to keep the Ponzi Scheme going for a few more quarters.

Why does this matter?  According to the leading economists fiat currency is perfectly capable of handling our trade and commerce.  It is backed by our productivity, not?  Never mind that more and more can be printed and will inevitably collapse into hyperinflation.  Never mind that fiat currency is rooted in debt that is designed to enslave us.  Never mind that the Fed was set up to allow for the funding of wars which always enrich MiLords, and for allowing MiLords to manipulate asset values (not just gold and silver) and ultimately to enable an Oligarchy to rule us.

It is not possible for me to say why MiLords are allowing, indeed aiding and abetting, China to set up their currency for being the next World Reserve Currency.  MiLords are actively making it possible for China to amass gold at bargain prices.  I have asked in earlier posts whether they have been outflanked or whether they have a plan that will unfold to our utter dismay?   Are they caught in a game they don’t know how to end and are willing to pay any price, including committing treason to keep the game going a bit longer? Or will they somehow recruit China’s elite to play their game?

I don’t know.

But I do know this.  Fort Knox is empty.  And when the US Dollar is no longer recognized as the World Reserve Currency, we will be the poorer for it.  A lot poorer.