As the integrity of the US banking system is compromised, private citizens should consider becoming their own central banks. The days of irredeemable paper fiat currencies may be approaching its end, and there is a reason why the central banks hold gold - it is their default insurance.

Do not be fooled, the gold reserves of central banks are their actual Money. Debt-based paper dollars, yen, pounds are all just ridiculous currencies, sad shadowy mirrors of their former selves, which is gold and silver coin. Gold's manipulated volatility cannot mask its >16% annualized returns versus the USD over the past 8 years. Remember - in actuality, it is the depreciation of the world's fiat currencies we are seeing, not the appreciation of gold itself which is itself both money and a currency.

China Added 454 Tons of Gold to Reserves Since 2003 (Update1)

April 24 (Bloomberg) -- China has added 454 metric tons of gold to its reserves since 2003 through domestic purchases and refining scrap, the official Xinhua News reported, citing Hu Xiaolian, head of the State Administration of Foreign Exchange.

Total gold reserves now stand at 1,054 tons, it said. The country has the world’s biggest foreign-exchange reserves at $1.95 trillion as of March 31, according to data compiled by Bloomberg. The foreign exchange reserves were $286 billion at the end of December 2002.

Got gold?

from LeMetroploe cafe

Since the start of 2009, Chinese M2 money supply has taken off like a rocket. As of March 2009, Chinese M2 is growing 26% year over year.

In comparison to the US money creation which is going down a derivative rathole, Chinese money creation is going towards the purchase of real assets. According to the latest from Gary Dorsch, http://www.kitco.com/ind/dorsch/apr152009.html , China bought 3.86 million tons of soybeans in March, up 66% from a year earlier, and the 2nd highest monthly amount ever. After checking the futures market for soybeans, I noticed that this market is pretty close to complete backwardation.

The action in copper is even more impressive. Again, according to Gary Dorsch, Chinese copper imports are up 71% to 451,000 tons in the first two months of this year from a year ago. As we know, the price of copper has been on a tear this year, up over 50%. A case could be made that this is due to the buying by the Chinese.

I have been tracking the copper futures prices for years. An amazing incident just occurred. About one week ago, I noticed that the price of the April 09 contract exceeded the May 09 contract - a minor partial backwardation for copper. On Friday 4/17/09, the copper market jumped into almost complete backwardation over one or two trading days at most. I have never seen a market jump into almost complete backwardation so fast. Enclosed is the pricing for copper from the WSJ.

http://online.wsj.com/mdc/public/page/2_3023-fut_metal-futures.html?mod=topnav_2_3000

It appears that China is thinking long term and stocking up on strategic metals and other commodities. Rather than just watching fiat currencies go up in a puff of smoke, China is buying strategic metals and commodities. With almost $2 trillion in foreign currency reserves, China could be buying these commodities for a long time. The question becomes, what is the next strategic commodity that China will start buying?

Other than oil which China is stocking up on, what could be more strategic than silver? If you want to fly a plane, high performance silver bearings are used in the jet engine. If you want to operate a car, over 40 silver tipped switches are used to start the engine, activate the power brakes, steering, windows, etc. You will need silver in the printed circuit boards to control the operation of planes, cars, electrical appliances, security systems, cell phones, telecommunication networks, solar panels, water purification, nano technology, biomedical applications etc. The critical uses for silver seem almost endless, especially because the price of silver is currently so inexpensive.

Let's assume the U. S. Geological Survey is correct with the world's total proven silver reserves of 270,000 tons. There is approx. 15 years left of silver at current mining rates. If you are thinking long term and you are China, why would you not start purchasing silver for strategic purposes right now? The Chinese have already started purchasing copper and soybeans. If you want to manufacture for the next 20 to 30 years, the near term purchase of silver over a considerable length of time would make sense.

Russia has become the first major country to call for a partial restoration of the gold standard to uphold discipline in the world financial system.

Arkady Dvorkevich, the Kremlin's chief economic adviser, said Russia would favour the inclusion of gold bullion in the basket-weighting of a new world currency based on Special Drawing Rights issued by the International Monetary Fund.

Chinese and Russian leaders both plan to open debate on an SDR-based reserve currency as an alternative to the US dollar at the G20 summit in London this week, although the world may not yet be ready for such a radical proposal.

Mr Dvorkevich said it was "logical" that the new currency should include the rouble and the yuan, adding that "we could also think about more effective use of gold in this system."

The gold standard was the anchor of world finance in the 19th century but began breaking down during the First World War as governments engaged in unprecedented spending. It collapsed in the 1930s when the British Empire, the United States, and France all abandoned their parities.

It was revived as part of fixed-dollar system until US inflation caused by the Vietnam War and "Great Society" social spending forced President Richard Nixon to close the gold window in 1971.

The world's fiat paper currencies have lacked any external anchor ever since. It is widely argued that the financial excesses and extreme debt leverage of the last quarter century would have been impossible -- or less likely -- under the discipline of gold.

Russia is a major gold producer with large untapped reserves of ore, so it has a clear interest in promoting the idea. The Kremlin has already instructed the central bank to gradually raise the gold share of foreign reserves to 10 percent.

China's government has floated a variant of this idea, suggesting a currency based on 30 commodities along the lines of the "Bancor" proposed by John Maynard Keynes in 1944.

Not only do we have a high probability of ETF and COMEX defaults now we have new legislation that could destroy precious metal mining companies in the US. Why carry risks? Physical bullion in your possession is the only asset that is no one else's liability.

The US congress is proposing new very restrictive mining regulations like yearly inspections and a whole gamut of new regulations specifically on precious metal miners....in the name of the environment... it's hard to say the effect on big US mines, but the smaller ones will have lots of trouble with this if it gets through.

Rahall Proposes Bill to End All Mining in the U.S.
by Scott Harn

Nick Rahall, chairman of the House Resources Committee, reintroduced mining reform legislation in the House of Representatives on January 27, 2009. The Congressman has obviously been away from real work for far too long. H.R. 699, the Hardrock Mining and Reclamation Act of 2009, should be labeled H.R. 666 because it appears to have been written by the Devil himself. If it passes as written, it will completely destroy an entire industry.

H.R. 699:
• Casual use would be redefined to allow only those activities that do not cause "any disturbance of public lands and resources." The collection of samples, use of gold pans and non-motorized sluices would be the only activities allowed without a Notice or Plan. Taking a vehicle off-road would also require a Notice or Plan. Any extraction of minerals for sale or use would require a Notice or Plan.
• H.R. 699 would be retroactive. Existing mining that is not already operating under a Notice of Plan would require proof of a valuable discovery to retain a mining claim, and those operating under a Notice or Plan would have ten years to bring their operation under compliance with the new regulations.
• The patenting of mining claims, which has been suspended by yearly legislation since 1994, would be permanently discontinued.
• The federal government would be entitled to an 8 percent gross royalty for all locatable minerals for any new mining operation.
Link to article...

Even if the miner is unable to make a reasonable profit at current commodity prices, he would have to give 8 percent to the federal government. Existing operations at the time the bill is passed would be subject to a 4 percent gross royalty, and any federal lands added to the operation after enactment of the bill would be subject to the 8 percent royalty.

The reporting requirements are absurd. Anyone transporting a locatable mineral, concentrate or product derived from a locatable mineral shall carry documentation declaring the amount, origin and intended destination. Miners shall create and maintain reports relating to the quantity, quality, composition, volume, weight and assay value of all minerals extracted from a mining claim. Failure to produce these reports when requested by any officer or employee designated by the federal government may result in involuntary forfeiture of the mining claim. ..."

from Dow Jones news wires

Veteran U.S. bullion dealers say the demand for gold and silver coins and investment bars so far during 2009 is perhaps the strongest they have ever seen.

Investors are snapping up physical metal amid ongoing worries about other financial investments, the health of the global banking system and fears about inflation down the road due to fiscal-stimulus efforts.

Buying gold in times of economic uncertainty isn’t new, but bullion dealers have noticed some differences in this investment surge. Dealers have reported growing institutional demand, rather than demand from just small retail investors, and a lack of backdated coins that historically could be bought at lower prices.

Bullion dealers said supply continues to be tight, although conditions have improved somewhat from 2008 when many of the mints around the world at times had to suspend sales due to a lack of blanks.

"We’re having some of our strongest months ever," said Scott Thomas, president and chief executive of American Precious Metals Exchange in Edmond, Okla. "The bottom line is our numbers are probably double what they were last year, and last year was very busy. The demand is incredible. And even the strong prices for metals are not slowing it down."

Most-active April gold futures on the Comex division of the New York Mercantile Exchange on Friday hit the $1,000-an-ounce level for the first time since July.

Through Sunday, Thomas said, his company had made nearly 10,000 trades so far in February, compared to 4,379 in the same year-ago period.

Officials at New Orleans-based Blanchard & Co. said the dollar value of their sales during the first 1 1/2 months of 2009 was more than all 12 months of 2007. This occurred as more investors read that gold and Treasury securities were about the only assets that survived the market "carnage" last year, said Donald W. Doyle Jr., chairman and CEO of Blanchard.

"People are moving out of stocks and bonds and CDs [certificates of deposit] in a large fashion," said George Cooper, senior account executive with Denver-based Centennial Precious Metals, who often works 12-hour days and describes business lately as "gangbusters." Many of the calls are from investors who lament losing half of their life savings to the tumble in stocks, he said.

James Cook, president of Investment Rarities in Minneapolis, said last week may have been the busiest for retail sales since he started his company in 1973.

"When they [Obama administration officials] came out with the new bailout plan, people were alarmed at what could happen to the purchasing power of the dollar," Cook said.

His company’s sales are roughly 75% silver and 25% gold. Physical sales of bars and coins last week totaled $5 million.

"Silver Eagles are still rationed," Cook said of the silver bullion coins available from the U.S. Mint. "We get 20,000 a week and they fly out the door. We can get 10,000 Silver Eagles on a Monday and basically they’re gone in 15 minutes. I have 55 guys on the phone calling out."

The industry veteran said the current demand has been more consistent and probably exceeds that from the bull run that carried silver to its all-time high above $50 an ounce in 1980 while also lifting gold to a then-record high that stood for 28 years.

Andrew Schectman, owner of Miles Franklin, based in Wayzata, Minn., described recent demand as "parabolically stronger" than in the past.

As an example of the interest in gold, he reported that a recent presentation he gave at the World Money Show in Orlando drew an audience of some 700 people, with more turned away due to a lack of space. By contrast, the audience at the same program a year ago was 75, he said.

Institutions, High-Net-Worth Investors Seek Coins, Bars

Several dealers said much of the current demand is coming from large investors and even institutional clients.

Most of Blanchard’s customers in years past were individual retail investors, Doyle said.

"More and more now, we’re finding we not only have individual investors but institutional buyers," he said. "That is a significant change even just in the past year or so."

And, Doyle added, institutional clients are buying in "significant quantities."

Cooper said more high-net-worth individual investors also are looking for coins and bars.

"Last year, it was the little guys, people with $10,000 to $20,000, up to $100,000," he said. "Now, we’re getting calls for $100,000, $500,000 to $1 million."

Yet another noticeable change is the absence of less-expensive backdated coins from past years, said Schectman, who has been in the business for 19 years.

During the last 15 years, if a client called wanting to place a large order for coins from any of the major mints around the world, Schectman would try to get coins from a past year. That’s because "an ounce [of gold] is an ounce is an ounce; it doesn’t matter," Schectman said. However, by purchasing an older coin, the investor could avoid a premium for a new-year coin caused by factors such as demand from collectors.

"What is unique about this time is that, since last year, roughly June, all of the backdated coins are gone," he said.

Thus, with no backdated coins, he anticipates there will be further back orders and delays from the world’s major mints.

"The secondary market for so many years made the industry, with people like yourself buying gold, holding it a few years and selling it back," Schectman said. "Nobody is selling. In $92 million of business done last year, if $5 million were related to buybacks, I would be shocked.

"If you are a small coin shop relying on the secondary market to give you supply, you’re going out of business."

In fact, with so many large orders from high-net-worth investors and the lack of metal on the secondary market, the "average person trying to buy gold and silver is going to have a very, very challenging time," Schectman said.

from the UK Telegraph

Gold hits record against euro on fear of Zimbabwean-style response to bank crisis
Gold has surged to an all-time high against the euro, sterling, and a string of Asian currencies on mounting concerns that global authorities are embarking on a "Zimbabwe-style" debasement of the international monetary system.

"This gold rally is driven by safe-haven fears and has a very different feel from the bull market we've had for the last eight years," said John Reade, chief metals strategist at UBS. "Investors are seeing articles in the press saying governments should deliberately stoke inflation, and they are reacting to it."

Gold jumped to multiple records on Tuesday, triggered by fears that East Europe's banking crisis could set off debt defaults and lead to contagion within the eurozone. It touched €762 an ounce against the euro, £675 against sterling, and 47,783 against India's rupee.

Jewellery demand – usually the mainstay of the industry – has almost entirely dried up and the price is now being driven by investors. They range from the billionaires stashing boxes of krugerrands under the floors of their Swiss chalets (as an emergency fund for total disorder) to the small savers buying the exchange traded funds (ETFs). SPDR Gold Trust has added 200 metric tonnes in the last six weeks. ETF Securities added 62,000 ounces last week alone.

In dollar terms, gold is at a seven-month high of $964. This is below last spring's peak of $1,030 but the circumstances today are radically different. The dollar itself has become a safe haven as the crisis goes from bad to worse – if only because it is the currency of a unified and powerful nation with institutions that have been tested over time. It is not yet clear how well the eurozone's 16-strong bloc of disparate states will respond to extreme stress. The euro dived two cents to $1.26 against the dollar, threatening to break below a 24-year upward trend line.

Crucially, gold has decoupled from oil and base metals, finding once again its ancient role as a store of wealth in dangerous times.

"People can see that the only solution to the credit crisis is to devalue all fiat currencies," said Peter Hambro, chairman of the Anglo-Russian mining group Peter Hambro Gold. "The job of central bankers is to allow this to happen in an orderly fashion through inflation. I'm afraid it is the only way to avoid disaster, but naturally investors are turning to gold as a form of wealth insurance."

One analyst said the spectacle of central banks slashing rates to zero across the world and buying government debt as if there was no tomorrow feels like the "beginning of the 'Zimbabwe-isation' of the global economy".

Gold bugs have been emboldened by news that Russia has accumulated 90 tonnes over the last 15 months.

"We are buying gold," said Alexei Ulyukayev, deputy head of Russia's central bank. The bank is under orders from the Kremlin to raise the gold share of foreign reserves to 10pc.

The trend by central banks and global wealth funds to shift reserves into euro bonds may have peaked as it becomes clear that the European region is tipping into a slump that is as deep – if not deeper – than the US downturn. Germany contracted at an 8.4pc annual rate in the fourth quarter. The severity of the crash in Britain, Ireland, Spain, the Baltics, Hungary, Ukraine and Russia has shifted the epicentre of this crisis across the Atlantic. The latest shock news is the 20pc fall in Russia's industrial production in January. The country is losing half a million jobs a month.

Markets have been rattled this week by warnings from rating agency Moody's that Austrian, Swedish and Italian banks may face downgrades over their heavy exposure to the ex-Soviet bloc. The region has borrowed $1.7 trillion (£1.2 trillion) – mostly from European banks – and must roll over $400bn this year.

Austria's central bank governor, Ewald Nowotny, said the regional crisis had become "dangerous" and called for a pan-EU rescue strategy to prevent contagion.

Bartosz Pawlowski, from TD Securities, said the recent plunge in currencies across Eastern Europe had come as a brutal shock. "The rout could potentially lead to substantial problems, if not an outright collapse of the financial system," he said, citing the rising real burden of debt taken out in euros and Swiss francs.

Even Poland – a pillar of stability in the region – may ultimately need a bail-out by the International Monetary Fund. Latvia, Hungary, Ukraine and Belarus have already been rescued. Romania's premier, Emil Boc said his country would decide over the next two weeks whether to seek an IMF loan. Turkey is next

From UK Times

The dollar is simply a piece of paper. Gold is a much better store of value and is the best insurance against future shocks
Last week was a bad one for bank shares; after the HBOS £8.5 billion loss, Lloyds shares fell by a third and other bank shares fell as well. Yet it was a very good week for the gold price, which closed on Friday at $935 an ounce, after reaching what was nearly a seven-month high of $953.30 on Wednesday.

Barclays Capital commented that gold prices were resuming their long-run bull trend after eight consecutive years of gains. For longer than the past eight years I have been arguing that investment in gold is an essential insurance against financial shocks. Last week was a classic example. Respectable British bank shares have now fallen by up to 90 per cent, while the gold price has risen by more than 200 per cent since Gordon Brown began selling the Bank of England's gold reserve.

I have been following the gold price since I published The Reigning Error, a short book on inflation, in 1974. I have not consistently advised people to buy gold - like all other assets, gold can become significantly overvalued, as it did in 1980. However, I have found that the movements of the gold price are one of the most useful pieces of evidence about the health of the world economy. Mr Brown's sale of gold was an avoidable error. My friend the MP Peter Tapsell repeatedly warned him in Parliament not to do it.

People buy gold when they are nervous about the economy, and they are right to do so because gold is a unique commodity. It has to a high degree two qualities that are seldom found together: liquidity and reality. It has strong liquidity; it can almost always be bought, sold or exchanged. There are other liquid assets, of which the US dollar is probably supreme, but they lack gold's quality of real value.

Dollars do not constitute a real asset, such as property or “real estate”. The dollar is simply a piece of paper. Gold has been a much better store of value than the dollar.

In 1873 one of the leading British economists, William Stanley Jevons, published a short book, Money and the Mechanism of Exchange. By 1887 it had reached its eighth edition. Unfortunately, there are few modern economists who do not suffer from the delusion that new truths make old ones obsolete.

Great mistakes could have been avoided in 2008 if bankers and politicians had studied Jevons, even though his little book was written 136 years ago. Jevons quotes Herbert Spencer as observing that “it is the grave misfortune of the moral and political sciences that they are continually discussed by those who have never laboured at the elementary grammar or the simple arithmetic of the subject”. That was true then, and it is true now. Indeed, there are still some people who believe that poverty can be abolished by the issue of printed bits of paper.

Nowadays such people usually call themselves Keynesians, though their doctrine is not to be found in the works of Maynard Keynes, a much less simplistic economist than some of his modern followers. These so-called neo-Keynesians are hostile to gold, usually for two reasons. They see gold as the natural enemy of the paper money in which they put their trust; they see gold-related systems as imposing a discipline on the unlimited issue of paper money, and they reject that.

World trade depends on the existing global system, which is one of paper currencies, separately managed and largely unconvertible. These currencies float in terms of each other, sometimes with a fixed rate in relation to a larger currency. Since President Nixon closed the gold window in 1971, there has been no fixed-rate convertibility between any of these paper currencies and gold. In the past 40 years the world exchange system has suffered from two periods of high inflation and is now suffering from the worst depression since the 1930s.

In 1873 Jevons could already write: “It is hardly requisite to tell again the well-worn tale of the over-issue of paper money which has almost always followed the removal of the legal necessity of convertibility. Hardly any civilised nation exists, which has not suffered from the scourge of paper money at one time or another... Time after time in the earlier history of New England and some of the other states now forming part of the American Union, paper money had been issued and had brought ruin.”

Daniel Webster's opinion should never be forgotten. Of paper money he says: “We have suffered more from this cause than from every other cause or calamity. It has killed more men, pervaded and corrupted the choicest interests of our country more, and done more injustice than even the arms and artifices of our enemy.”

In the 1930s some nations tried to beat the slump by competitive devaluations. In the present crisis, Britain has already experienced a very big devaluation of the pound, taking it down by a quarter against the dollar. Every country, led by the United States, has been issuing money, often in very large amounts, in order to bail out its banks. No one knows the total value of these national injections of cash into the banking systems. As the earlier injections have not restored stability to national economies, further injections inevitably will be made. All will be made in unconvertible currency, and overissue will occur.

Sooner or later the world's governments will have to reconsider Keynes's two real achievements, Britain's low inflation finance of the Second World War, and the world currency system that he negotiated at Bretton Woods.

Both Jevons and Keynes believed in the need for what Jevons called “a worldwide system of international money”. Without it, recurrent crises, such as the present one, will be inevitable. Governments need to create a new world system, in which gold, as a stabiliser, should play its part. For individuals, gold remains the best insurance against future shocks and the best store of value.

Financial Times UK

Investors are buying record amounts of gold bars and coins, shunning risky assets for the relative safety of bullion amid renewed fears about the health of the global financial system.

The US Mint sold 92,000 ounces of its popular American Eagle coin last month, almost four times that which it sold a year ago and more than it shipped during the whole of the first half of 2007.

Other countries’ mints have also reported strong sales. "Large purchases of coins are perhaps the ultimate sign of safe-haven gold buying," said John Reade, a precious metals strategist at UBS.

Inflows into gold-backed exchange traded funds surged in January, pushing their bullion holdings to an all-time high of 1,317 tonnes. Last month’s flows of 105 tonnes were above September’s previous record of 104 tonnes, and absorbed about half the world’s gold mine output for January, said Barclays Capital.

"We estimate that investment demand [into gold] could double in 2009 compared to 2007," said Mr Reade. "Purchases of physical gold have jumped over the past six months as investors’ fears about the current financial crisis ... have intensified."

The move into gold is being driven by the very rich, with bankers saying that some clients are hoarding gold in their vaults. UBS and Goldman Sachs said last week that investor hoarding would drive prices back above $1,000 an ounce. On Monday gold was trading at $892 an ounce.

Traders and analysts said jewellery demand, historically the backbone of gold consumption, had collapsed under the weight of the high prices. Sharp falls in demand in the key markets of India, Turkey and the Middle East have capped the potential of any price rally. But the lack of jewellery demand has not discouraged investors.

Jonathan Spall, director of commodities at Barclays Capital in London, said: "We have seen more new enquiries about investing in gold so far this year than during the whole 2008."

Philip Klapwijk, chairman of GFMS, the precious metal consultancy, said that investors were buying gold because of fears about the global financial system rather than looking for a quick gain.

"This is a new round of safe haven buying," Mr Klapwijk said.

GFMS estimated bullion coin demand last year reached its highest level in 21 years.

James West

The prospect of the United States defaulting on its debt is not just likely. Its inevitable, and imminent.

The regulatory black holes into which sanity and reason disappear on a daily basis are soon to collapse under the mass of their sheer size. The circle jerk going on among G7 governments has to end – the steady advance of gold, even in the face of a managed price, exposes the real value of the U.S. dollar, as opposed to its apparent value expressed in the dollar index.

Is 2009 the year that the United States formally defaults? And with that, will the dollar collapse an be rolled back ten for one or more?

There are a lot of reasons to support that theory. To Wall Street economists, such an event is heresy and therefore unthinkable. Yet Wall Street is the very La-la-land that bred the idea of a perpetually indebted nation in the first place.

Number one among the indicators favoring this scenario is what is happening in the U.S. Treasuries auction market.

Last Thursday, an $30 billion auction in five-year notes failed to stir the interest of traditional primary dealers. The auction itself was saved by an anonymous “indirect” bid.

Buyers are discouraged by the prospect of what is expected to amount to $2 trillion total issuance for the full year of 2009. The further out the maturities on notes, the more bearish the sentiment towards them. The only way to entice buyers is through the increase in yields.

But with yields at 1.82 per cent, five-year notes were met with a demand for 1.98 times the amount offered - the lowest bid-to-cover ratio since September. A sell-off in treasuries began in earnest upon the conclusion of that auction.

The U.S. Federal Reserve suggested last week that it was going to step up its treasury-buying activity, and the mainstream media interprets this as a form of market support. What it actually is evidence of growing anxiety and desperation on the part of the Fed as the realization dawns that demand for treasuries is progressively evaporating.

The increased demand for gold as an investment witnessed throughout the last two weeks that has pushed gold to a 4 month high is further evidence that investors across the board are gravitating more towards gold and away from U.S. debt.

So what is the catalyzing event that will precipitate outright capitulation?

I think the spin-controlled version of events will make the collapse of the derivatives market the red herring that facilitates the aw-shucks-we-have-no-choice shoe-gazing moment possible, and that’s exactly the parachute the government needs to retain a veneer of credibility - at least in its own delusional mirror.

The announcement that the CFTC was about to become the target of a regulatory overhaul supports this theory. Consistent with his unfortunate proclivity to hiring foxes to guard chickens, Barack Obama’s choice for CFTC commissioner Gary Gensler was the undersecretary of the U.S. Treasury when the Commodity Futures Modernization Actt of 2000 was passed, and is one of its architects. This was the piece of legislation that was put forth to appease the opposition to “dark market” trading in certain OTC derivatives first noisily derided by CFTC commissioner Brooksley Born in 1998.

Ignoring Born’s admonishments with this act, it exempted credit default swaps (CDO’s) from regulation, resulting in the somewhere between 58 and 300 trillion dollars in value presently under threat if the positions were to be unwound. Because of their unregulated status, counterparties in the largest transactions can simply “roll forward” contracts, instead of the losing party in the transaction covering their loss with a transfer of money. It is this massive “nominal” value that could be the Achilles heel of what’s left of the U.S. banking system, and by extension, the U.S. dollar.

I don’t arrive at this conclusion because I like making catastrophic outlandish predictions. Its merely the result of following certain logical paths to their most likely outcome based on what has happened in the past.

In discussions on this topic with editors of top tier financial publications, such speculation is dismissed out of hand, and the argument to refute the likelihood of such outcomes is never brought forward.

Gold exchange traded funds (ETF’s) are now the largest holders of physical gold, and as a proxy for investors who don’t want to be encumbered with taking delivery of the physical, provide a simple way to participate in the gold market.

United States citizens should bear in mind, however, that should the banking system be brought down completely by the collapse of the futures market, proxies for gold such as ETF’s and bullion funds could theoretically be targeted by a government desperate for possession of value. The risk from security in holding physical bullion is matched by the risk of confiscation by government in these volatile times. Don’t forget, the government confiscated and outlawed private ownership of gold in 1933 in support of an ill-conceived gold standard, which to some extent, was that era’s spin to halt the flight of gold (and real value) from U.S. soil.

From the Financial Times

That’s not in Zimbabwe by the way.

Morgan Stanley’s Jocahcim Fels and Spyros Andreopoulos look at the possibility of hyperinflation hitting the western shores of the UK, Europe and the US in their latest note. Their conclusion is a little scary (our emphasis).

One stark lesson from the ongoing financial and economic crisis is that so-called black swans — large-impact, hard-to-predict and seemingly rare events — can occur more frequently than generally believed.
With policymakers around the world throwing massive conventional and unconventional monetary and fiscal stimuli at their economies, we think that it is worth exploring the black swan event of very high inflation or even hyperinflation.

While such an outcome is clearly not our main case, the risk of hyperinflation cannot be dismissed very easily any longer, in our view. We discuss the historical evidence, the conditions that can lead to very high or hyperinflation, and whether and how it might happen again.

So hypinflation is a black-swan event that, given all the other black-swan events of late, should not be dismissed.

As they remind, the classification of hyperinflation is: an episode where the inflation rate exceeds 50 per cent per month. In history this has occurred in the 1920s in Austria, Germany, Hungary, Poland and Russia. Germany in 1923, for example, experienced a 3.25m per cent inflation rate in a single month (see picture left). Since the 1950s hyperinflations have been experienced in Argentina, Bolivia, Brazil, Peru, Ukraine and Zimbabwe - so confined largely to developing and transitioning economies.

The root cause of hyperinflation is: ‘excessive money supply growth, usually caused by governments instructing their central banks to help finance expenditures through rapid money creation.’

Back to whether it could happen to Europe or the US? Morgan Stanley says possibly yes, under certain conditions.

Firstly, the rapid expansion of the monetary base by the Fed, ECB and BoE would have to continue and feed into a more rapid and sustained expansion of money in the hands of the general public.



Secondly, Morgan Stanley says governments would have to face difficulties financing their bailout packages and funding their debt.

Lastly, public confidence in the government’s ability to service debt without resorting to the printing press would have to disappear, as well as the government’s actual ability to withstand the pressure to do so in the first place.

And while all of the above is an extreme scenario, the Morgan Stanley analysts say:

…given the size of the current and prospective economic and financial problems, and given the size of the monetary and fiscal stimulus that central banks and governments are throwing at these problems, investors would be well advised not to ignore this tail risk, especially as markets are priced for the opposite outcome of lasting deflation in the next several years. Put differently, we believe that buying some insurance against the black swan event of high inflation or even hyperinflation makes sense and is relatively cheap currently.


Of course, when hyperinflation occurred in the eastern block countries towards the end of the communist era, most citizens hedged via significant purchases of black-market US dollars, the US dollar becoming the effective proxy store of value. This time round, that would not be an option.

From UK Daily Mail

Narrow escape: The Bank of England was forced to contact RBS's creditors abroad to persuade them not to withdraw their funds
Britain was just three hours away from going bust last year after a secret run on the banks, one of Gordon Brown's Ministers has revealed.
City Minister Paul Myners disclosed that on Friday, October 10, the country was 'very close' to a complete banking collapse after 'major depositors' attempted to withdraw their money en masse.
The Mail on Sunday has been told that the Treasury was preparing for the banks to shut their doors to all customers, terminate electronic transfers and even block hole-in-the-wall cash withdrawals.
Only frantic behind-the-scenes efforts averted financial meltdown.
If the moves had failed, Mr Brown would have been forced to announce that the Government was nationalising the entire financial system and guaranteeing all deposits.
But 60-year-old Lord Myners was accused last night of being 'completely irresponsible' for admitting the scale of the crisis while the recession was still deepening and major institutions such as Barclays remain under intense pressure.
The build-up to 'Black Friday' started on Monday, October 6, when the FTSE 100 dropped by nearly eight per cent as bad news on the economy started to multiply.
The following day, Chancellor Alistair Darling began all-night talks ahead of an announcement on the Wednesday that billions of pounds of taxpayers' money would be used to pour liquidity into the system.

More...Knees-up at the Treasury as Britain plunges into recession
£10,000 junket to Brussels for the Cabinet Sir Humphreys as dole queue hits 10-year high
Scottish thrift? You must be joking
Icelandic senior minister resigns as government becomes first global political casualty of the credit crunch

But shares continued to plummet, turning into a rout on the Friday when the FTSE crashed by ten per cent within minutes of opening.
Both Royal Bank of Scotland and HBOS were nearing complete collapse - but Lord Myners, who built up his fortune during a long career in the City, said the problems ran far wider.
'There were two or three hours when things felt very bad, nervous and fragile,' he said. 'Major depositors were trying to withdraw - and willing to pay penalties for early withdrawal - from a number of large banks.'
Lord Myners: 'There were two or three hours when things felt very bad, nervous and fragile'
The threat to the system was so severe that the Bank of England was forced to contact RBS's creditors in New York and Tokyo to persuade them not to withdraw their funds, but it is not known which other banks faced a run on their reserves.
'We faced the very real problem of how banks could stop depositors from withdrawing their money,' a Treasury source said yesterday.
'The banks themselves were selling their shareholdings, accelerating the stock-market falls, and preparing to shut up shop. Mortgages would have been sold on and savers would have been spooked, to put it mildly. It would have been chaos.'
After a weekend of crisis talks, which concluded at dawn on the Monday, it was announced that Lloyds TSB was taking over HBOS, supported by £17billion of taxpayers' money, and RBS would receive an injection of £20billion - prompting the resignation of RBS's infamous chief executive, Sir Fred 'the shred' Goodwin. Share prices at last started a small rally.
Ruth Lea, economic adviser to the Arbuthnot Banking Group, said last night that it was 'highly irresponsible' for Lord Myners to reveal the scale of the problems because it could serve to further wreck already fragile levels of confidence.
'We are not out of the woods yet,' she said. 'I fear for Barclays, after the fall in its share price, and Lloyds has been damaged by the HBOS takeover.'
She added: 'If it was panning out in that way, then the Government would have had no choice but to step in and nationalise the entire financial system.'
Angela Knight, chief executive of the British Bankers Association, said: 'The issues related only to HBOS and RBS. To imply that all the banks would have gone under is wrong. It is complicated.'
Lord Myners also said that bank executives had been 'grossly over-rewarded' during the 'golden days' of big bonuses. 'They are people who have no sense of the broader society around them,' he said. 'There is quite a lot of annoyance and much of that is justified.'

by John Browne Euro Pacific Capital

Most consider the New York market ‘spot’ price for an accurate indication of the true price. However, investors now buying buy physical or ‘fabricated’ gold, are paying a premium of between $20 and $30 per ounce. When these gaps existed in the past, major increases in the price of gold were imminent.

For much of the 20th Century, gold continuously defied global government efforts to restrain its price. The premium currently in place may be evidence of the latest round of such policies.

In 1934, President Roosevelt devalued the U.S. dollar by some 75 percent by raising the official price of gold from $20 to $35 an ounce. This opened the door to the first great wave of inflation of the 20th Century. Following World War II, national governments, particularly the American Treasury, held the vast bulk of the free world’s gold. The official $35 price was maintained, almost by official dictate.

However, in the 1960’s, a ‘free’ market gradually developed that traded gold at a premium to the official $35 price. In response, the London Gold Pool, a central bankers’ gentlemen’s agreement led by the Bank of England and the New York Fed, was established to hold the so-called ‘free’ market price of gold “to more appropriate levels” … to “avoid unnecessary and disturbing fluctuations in price” which could erode “public confidence in the existing international monetary structure.” The agreement lasted until 1968. Thereafter, the price of gold was set solely by the free market.

As the inflationary financing of the Vietnam War began to filter into the international economy, private investors and nations with trade surpluses began to buy gold to protect their wealth. The ‘free’ market price began to soar above $35 an ounce. Far from reducing the demand for gold, as many esteemed Keynesian economists had predicted, this free market price increased the demand for gold.

Surplus nations demanded gold from the American Treasury at the official price. Experiencing a serious run on the national official gold reserves, President Nixon broke the U.S. dollar gold exchange link in August 1971. It unleashed a wave of competitive international currency devaluations and the second great inflation of the 20th Century. Subsequently, the U.S. dollar was devalued further, by some 20 percent, as gold officially was revalued to $42 an ounce.

However, led by America, the central banks then made a determined attempt, through the IMF, to “demonetize” gold. Central banks agreed not to fix their exchange rates against gold and agreed ‘voluntarily’ to the removal of their obligation to conduct transactions between themselves at the official price.

In addition, the IMF was persuaded to ‘distribute’ some 153 million ounces of gold into the market and to minor nations. This had the perverse effect of greatly increasing the interest in owning gold.

An even stronger ‘free’ market began to operate alongside the official price. As inflation continued to clime, so did gold. In the early 1980’s the free market price reached $850 an ounce, while the official price remained at $42 an ounce.

In 1999, the Central Bank Gold Agreement (CBGA), also known as the Washington Gold Agreement, led to the coordinated sales of central bank gold via the IMF. Clearly designed to depress the free market price, it is widely believed that the IMF sales were timed to magnify volatility in the free market price in order to destroy gold’s perceived worth as a ‘store of value’. The CBGA was renewed on September 27, 2004, for a further five years.

More recently, market dealers have become increasingly aware of a covert official ‘blessing’ for large naked short positions opened by major ‘bullion’ banks. These bets are designed to force down the free market price of gold.

In the mainstream investment community, gold has been consistently scorned as an investment. Many respected analysts have even suggested that gold’s allure is wholly based on perception and that the metal lacks intrinsic value. And yet, in terms of U.S. dollars, gold returned about 5.8 percent in 2008, following a 31.4 percent return in 2007. Thus far in the 21st Century, gold has delivered an average annual return of some 16.3 percent.

Despite the powerful attempts of governments to eradicate gold’s role in monetary affairs, the free market price has risen continuously. Today, although the possibility of global depression act as a head wind, the existence of an “above market” premium for fabricated gold, may foretell a major threat to the credibility of paper currencies, a major U.S. dollar devaluation and a consequent strong rise in the price of gold in the months ahead

Billionmark comment

Weimar style policy is now global. With nothing backing paper currencies except other currencies disaster awaits. As Marc Faber says "citizens, who are not dumb, realize that the Central Banks are engaged in a contest to print the most money, to keep the cost labor low, the employment high and to erase the Nationial debts. This will destroy the currencies, confidence and create instability......I expect there maybe a panic into Gold and a scramble into physical gold"

from the UK Telegraph


The Bank of England will be able to print extra money without having legally to declare it under new plans which will heighten fears that the Government will secretly pump extra cash into the economy.

The Government is set to throw out the 165-year-old law that obliges the Bank to publish a weekly account of its balance sheet -- a move that will allow it theoretically to embark covertly on so-called quantitative easing. The Banking Bill, which is currently passing through Parliament, abolishes a key section of the law laid down by Robert Peel's Government in 1844 that originally granted the Bank the sole right to print UK money.

The ostensible reason for the reform, which means the Bank will not have to print details of its own accounts and the amount of notes and coins flowing through the UK economy, is to allow the Bank more power to overhaul troubled financial institutions in the future, under its Special Resolution Authority.

However, some have warned that it means "there is nothing to stop an unreported and unmonitored flooding of the money market by the undisciplined use of the printing presses."

It comes after the Bank's Monetary Policy Committee cut interest rates by half a percentage point, leaving them at the lowest level since the bank's foundation in 1694.

With the Bank rate now at 1.5 percent, most economists suspect that the Government and Bank will soon be forced to start quantitative easing -- directly increasing the quantity of money in the economy -- in a drastic attempt to prevent a recession of unprecedented depth.

Although the amount of easing is likely to be limited, news of this increased secrecy will spark comparisons with Weimar Germany and Zimbabwe, where uncontrolled use of the central banks' printing presses ultimately caused hyperinflation.

The Bank said it will still publish details of its balance sheet, but, significantly, the data -- the main indicator of the extent of quantitative easing -- will not be presented until more than a month has elapsed. For instance, under the new terms of the law, if the Bank were to have embarked on a policy of quantitative easing last month, the figures on this would not be published until the end of this month.

The reforms, which are likely to be implemented later this year, will make the Bank of England by far the most secretive major central in the world, experts said.

In the US, where the Federal Reserve has already cut rates to close to zero and started quantitative easing, the main way to track its purchases of securities and the expansion of its balance sheet is through precisely these same weekly accounts.

"Quite why the Bank has to keep its operations so shrouded in secrecy is a mystery to me," said Simon Ward, economist at New Star. "This will make it much more difficult to track what the Bank is doing."

Among the details which will no longer be published are those revealing the extent to which London's banks are using the Bank's deposit facilities -- a yardstick of pressure in the financial system.

Debating the issue in the House of Lords recently, Lord James of Blackheath, a Conservative peer, said: "Remove [this] control and there is nothing to stop an unreported and unmonitored flooding of the money market by the undisciplined use of the printing presses.

"If we went down that path we would be following a road which starts in Weimar, goes on through Harare, and must not end in Westminster and London. That is the great fear that the abolition of that section will bring about -- but the Bill abolishes it."

by John Browne, Euro Pacific Capital

One of the few things more troubling for an economy than government intervention is government intervention driven by panic. Time and again, history has shown that when governments rush to engineer solutions to pressing problems, unintended difficulties arise.

In the current crisis, there is growing evidence that Washington is in a state of increasing panic. Despite its massive cash injections, market manipulations and ‘rescue’ plans, the recession is clearly deepening and spreading. With little to show thus far, politicians don’t know if they should redouble past efforts, break ground on new initiatives, or both. However all agree, unfortunately, that the consequences of doing too little far outweigh the consequences of doing too much.

Although there are many parallels between the current crisis and the Crash of 1929, one key difference is the global profile of the U.S. dollar. In 1929, the dollar was on the rise, and would soon eclipse the British Pound Sterling as the world’s ‘reserve’ currency. Furthermore, the American economy was fundamentally so strong that in 1934 America was the only major nation able to maintain a currency tied to gold.

Ever since, the U.S. dollar’s privileged ‘reserve’ status has been a principal factor in America’s continued prosperity. The dollar’s unassailable position has enabled successive American governments to disguise the vast depletion of America’s wealth and to successfully increase U.S. Treasury debt to where the published debt now accounts for some 100 percent of GDP. The total of U.S. Government debt, including IOU’s and unfunded programs, now stands at a staggering $50 trillion, or five times GDP! If the dollar were just another currency, this never would have been possible.

In today’s crisis however, the dollar is likely making its last star turn as the leading man in the global financial drama. Other stronger, less burdened currencies are waiting in the wings for the old gent to take his final bows.

The dollar’s demise is being catalyzed by the neglect of the Federal Government. Instead of enacting policies that would restructure the U.S. economy, and restore productive, non-inflationary wealth creation, Congress is simply financing the old crumbling edifice.

Faced with the growing realization that America is not doing the work necessary to right its economic ship, it will not be long before America’s primary creditors begin to seriously question the nation’s ability to service, let alone repay, its debts.

There is now the prospect (inconceivable until recently), that America could lose its prestigious ‘triple-A’ credit rating. In today’s risk adverse market, this could cost the Treasury one percent in interest on long bonds. Each additional percentage point of interest would cost America some $10 billion a year on each trillion dollars of new debt, or some $300 billion over the life of a 30-year bond.

Many of the foreign governments who hold huge amounts of U.S. dollar Treasury debt, such as China and Japan, have announced plans to spend money on their own ailing economies. Should these foreign central banks divert to domestic initiatives some of the funds used to buy U.S. Treasuries, serious upward pressure on U.S. interest rates will result. Should they actually sell parts or all of their holdings they will likely put serious downward pressure on the U.S. dollar. Last week, a Chinese official claimed the U.S. dollar should be phased out as the world’s ‘reserve’ currency.

In the short term, as dollar ‘carry-trades’ continue to be unwound and questions of political will and falling interest rates haunt the Euro and some other currencies, the U.S. dollar may be the recipient of some upward appreciation. But with the American Government appearing increasingly to be in panic mode, a run on the U.S. dollar could develop rapidly into cascading devaluation. Even if no such panic run materializes the long-term outlook for the U.S. dollar is one of high risk and low return. This beckons major upward pressure on precious metals.

from the Financial Times

The great challenge confronting the foreign exchange market at the start of 2009 is finding a good alternative to the US dollar. One of the ironies of market events during 2008 was that the US financial crisis produced a flight to safety in the dollar. The dollar emerged triumphant from a financial debacle that centred on $1,300bn (€960bn, £890bn) of subprime US mortgage loans. The fallout has triggered a $32,000bn decline in global stock market capitalisation and driven all the Group of Seven leading industrialised countries into recession.

The dollar slumped against the euro during the final weeks of 2008 but fears about the financial system still drove US Treasury yields down to zero on three-month paper and less than 2.1 per cent on 10-year notes. This fear factor is likely to sustain demand for the dollar during the early months of 2009.

There is not now a clear alternative to the dollar because all big economies have slid into recession. Real gross domestic product could contract by 1.5 per cent in both the US and Europe during 2009 and by as much as 2.5 per cent in Japan. The decline in world trade and commodity prices will also reduce significantly the growth rates of the emerging market economies. South Korea and Taiwan are already in severe slumps. The growth rate of China could halve.

The US economy could be the first to emerge from recession this year because it appears to be headed for a far more aggressive macroeconomic stimulus programme than any other country. Barack Obama’s administration will announce a $700bn-$800bn multi-year fiscal package focusing on cuts in payroll taxes, aid to state and local governments and infrastructure investment. The Federal Reserve is also engaging in a programme of unprecedented monetary stimulus. It has slashed its core lending rate to zero and tripled the size of its balance sheet since August. Ben Bernanke, the Fed chairman, has also stated his willingness to engage in further large liquidity injections to buy mortgages, consumer loans and government securities. Mortgage rates have recently eased to 5.1 per cent after remaining above 6 per cent during the past year.

The European response to the recession has been far less aggressive. The European Central Bank is still under the influence of the Bundesbank and will ease monetary policy far more gradually than the Fed. Some Bundesbankers are opposed to cutting interest rates at this month’s meeting. The ECB policy could produce political tensions because interest rate spreads on Greek and Spanish bonds have risen sharply compared with German bonds. Japan’s government has been announcing modest fiscal policy changes but it cannot act decisively since it no longer controls the upper house of the Diet. And an election, before September, could produce a change of government.

The Kevin Rudd government in Australia announced a fiscal stimulus programme in October and Canada will announce a big fiscal package at the end of this month. But both currencies are dominated by market perceptions of the outlook for Chinese industrial production and commodity prices, not domestic economic policy.

If the US stimulus policy revives the economy by spring or summer, the dollar could rally further. The risk posed by US policy comes from potential market concerns about monetary policy becoming inflationary. The current growth rate of the Fed’s balance sheet is totally unprecedented. As a result of the Obama fiscal policy and the troubled asset relief programme, the Federal government’s borrowing requirement could rise to $1,500bn-$1,700bn this year. Government bond yields have collapsed because of investor fears about the safety of the financial system but they could rebound when conditions normalise. The current level of yields is the lowest since the period of official interest rate controls during the second world war. Mr Bernanke has indicated that he would be prepared to return to the wartime policy of restraining yields. What remains unclear is whether such a policy of accommodation would provoke fears about inflation and encourage dollar selling, which could in turn drive up bond yields.

Foreign central banks could play an important role in the US government bond market because they already own about half of the existing debt stock. China recently displaced Japan to become the largest holder of US government securities because of its long-standing policy of intervening to manage its exchange rate against the US dollar policy. As a result of the downturn in its economy, China has recently begun to lose foreign exchange reserves and may not need to intervene in the market again to restrain the renminbi. Japan, by contrast, has been experiencing significant upward pressure against the yen despite the severe downturn in its exports and output growth. Japan has not intervened since 2003 but, if the yen rallies another 5 per cent, the country could be forced to spend large sums restraining its currency. If it does, Japan could provide $200bn-$300bn of funding for the US deficit during 2009 while Chinese demand for US securities fades.

As a result of the global scope of the recession, there is no country that wants its exchange rate to appreciate. The clear alternative to the dollar in 2009 is not other currencies but that ancient form of money: gold. Precious metals could emerge as a hedge for investors suspicious of central banks and fearful that inflation will be the simplest solution to the challenge of global deleveraging.

excerpt from the New York Times

A huge United States government deficit, low interest rates and rapidly growing money supply all add to the likelihood of renewed inflation — and a rising gold price. How high? Very.

The United States money supply grew slowly for a while in early autumn, but in the two months to Dec. 1 the St. Louis Federal Reserve’s “money of zero maturity” measure, essentially cash and similar instruments, increased at an 11.7 percent annual rate. That’s a return to the trend that lasted from 1995 to 2008, when the measure grew 3.6 percentage points faster than nominal gross domestic product.

The United States is not alone. Around the world, governments have implemented large stimulus packages. If they don’t want the borrowings to fund these to crowd out the private sector, they must be financed by creating more money.

That monetary expansion is not supposed to be inflationary, since the governments promise to take any money away before it can push up prices. Investors can be forgiven for skepticism. Higher inflation is at least possible once the global recession bottoms out.

Gold provides good insurance. Investment demand for it has increased rapidly in 2008, despite a falling price since June. The dollar value of gold demand was 45 percent higher in the third quarter than in the second, and 51 percent higher than the previous year, according to the World Gold Council. Supply has failed to keep up, with mine output up only 2 percent from the previous year and central bank sales down sharply.

Weak supply, strong demand and fears of inflation constitute a perfect mix of ingredients for a gold rally. Any surge into gold by hedge funds and other speculators could overwhelm the market, turning the rally into a bubble.

In January 1980, just before the Federal Reserve avoided an inflationary catastrophe, the gold price peaked at $875. That is $2,430 in today’s dollars. But the pools of speculative capital are much larger now than in 1980. A true gold bubble could well leave this benchmark far behind.

Most of us start the New Year with ambitious new goals or resolutions aimed at self improvement. Listed below are my thoughts on the top 9 resolutions for '09.

1. Ditch the advisor

The 25 year bull market in stocks 1982 - 2007 has masked the incompetence of most financial advisors. Anyone can make money in a rising market, especially with the Greenspan put in place for most of that time. The fat happy "fee"lines will not serve you well in the new world. 2008 was simply a taste of the future.

- Ditch your advisor, think and act critically and independently.

2. Change your psychology

The financial, economic and political environment has changed rapidly and significantly, the same old "buy equities on the dips and hold for the long term" philosophy will not work going forward.

- Ditch your advisor, think and act critically and independently
- Change your psychology to sell stocks on rallies

3. Become trendy

Most people would be surprised to learn that gold rose for the eighth year in succession in 2008. In fact in many major currencies gold hit new all time highs and recorded dramatic percentage increases in 2008.

"The appreciation gold has achieved over the past eight years is remarkable. Without any doubt, gold's 16.3% average annual change against the US dollar has made it one of the world's best performing asset classes this decade, but oddly, gold continues to be ignored by many. I expect this inattention to change in the year ahead."

James Turk, Chairman GoldMoney

This stealth performance of gold has been driven by smart money and in the absence of media fanfare. The strength of the trend and underlying fundamentals point to massive upside potential for gold. Become trendy, get gold.

- Ditch your advisor, think and act critically and independently
- Change your psychology to sell stocks on rallies
- Become trendy, get gold.

4. Gamble less

The 2008 crisis has been a financial one. It is widely acknowledged that credit constraints (and now demand destruction) will have significant impacts on the real economy in 2009. Remember the bulk of credit default swaps (CDS) derivatives at the core are based on the real companies selling real things. A similar analogy would be at the core of the credit crisis is falling house prices. If Marc Faber, Nouriel Roubini and others are right 2009 will be an economic disaster. In 2008 the Fed & treasury have backstopped the financial institutions who hold the CDS but they are powerless to prevent the underlying corporate bonds from defaulting in a severe economic downturn. With this giant ponzi scheme it will only take a few defaults to unravel the house of cards. The US government being the ringmaster with JP Morgan, Goldman Sachs, HSBC, Deutsche Bank and Citigroup et al as the clowns. This is not a time for speculation and excessive risk. Gamble less. Focus on return of money not return on money.

- Ditch your advisor, think and act critically and independently
- Change your psychology to sell stocks on rallies
- Become trendy, get gold
- Gamble less. Focus on return of money not return on money

5. Pay off debt and save money

The drop in interest rates around the globe to almost zero is not sustainable. It will magnify and accelerate the problems. The reason we are in this mess is excessive debt. How does more debt solve a debt problem? It doesn’t! Remember the mountain of debt is so great it can never be repaid. We are left with only two options: default ala Russia 1999 or Argentina 2003 or hyperinflation Zimbabwe style. The problem with default is that the US is the reserve currency of the world so all fiat currency (& therefore countries) go with it. In addition banks would lose their power base. Default is not an option. Hyperinflation on the other hand can delay the outcome and ultimately be blamed on other factors, eg Peak oil, commodity prices, war etc. The banks retain control. The reality is that governments and central banks have already declared their hand with zero interest rates and quantitative easing policy. The effect will be massive inflation on a global basis. Market forces will eventually prevail and interest rates will rise dramatically. Pay off your debt and save real money, not currency.

- Ditch your advisor, think and act critically and independently
- Change your psychology to sell stocks on rallies
- Become trendy, get gold
- Gamble less. Focus on return of money not return on money
- Pay off your debt and save real money, not currency

6. Watch less TV

CNBC and other infotainment channels are simply cheerleaders for the financial industry, Fed and US Government. Turn it off. It’s just a distraction. Watch less TV, avoid the propaganda.

- Ditch your advisor, think and act critically and independently
- Change your psychology to sell stocks on rallies
- Become trendy, get gold
- Gamble less. Focus on return of money not return on money
- Pay off your debt and save real money, not currency
- Watch less TV, avoid the propaganda

7. Get more physical

Paper assets are simply a promise to pay. You are reliant on the counterparty making good their promise to pay or deliver the asset they hold for you. This can apply to stocks, cash in bank, bullion and almost all other assets. Did you know that many large stocks have 50% more shares under claim by holders than have ever been issued by the company? How could this be possible? If you read the fine print of your margin agreement it allows your broker to use your margined shares for other purposes often resulting in double ownership claims for the same share. In addition illegal naked short selling is well documented in the US and Canada. One US company with 50 million shares outstanding recently had a proxy vote submissions for over 90 million shares. Lax regulatory oversight and digital holding certificates has enabled what constitutes counterfeiting shares by investment banks and brokers. What happens to your stocks if your broker goes under? If it’s just a digital entry in a system somewhere how do you claim possession? What happens if 100 million claims come for 50 million outstanding shares? There is no simple answer to these questions but undoubtedly the lawyers will get rich after the blow up. Protect yourself by taking delivery of actual stock certificates issued by the company. It is the best proof of ownership. Similar logic applies to bullion. Holding it in paper is simply a claim, not real bullion.
The financial industry is a huge house of cards. A small amount of assets with a huge number of derivatives on it and derivatives on those derivatives. When the game of musical chairs stops, who will hold physical assets and who will hold worthless paper? Get more physical, hold what is rightfully yours.

- Ditch your advisor, think and act critically and independently
- Change your psychology to sell stocks on rallies
- Become trendy, get gold
- Gamble less. Focus on return of money not return on money
- Pay off your debt and save real money, not currency
- Watch less TV, avoid the propaganda
- Get more physical, hold what is rightfully yours.

8. Work harder

The financial crisis will evolve into an economic crisis in 2009. There will be no soft landing. Many people liken it to the great depression, I disagree. It will be much worse. The depression of the 1930's was a deflationary depression. Whilst unemployment was high, the cost of living decreases cushioned the blow to some extent. Unfortunately as a direct result of government and central bank policy we are headed for a hyperinflationary depression. Massive unemployment occurs with significant increases in the cost of living. This will be the Zimbabwe model on a global scale. Work harder, stay employed.

- Ditch your advisor, think and act critically and independently
- Change your psychology to sell stocks on rallies
- Become trendy, get gold
- Gamble less. Focus on return of money not return on money
- Pay off your debt and save real money, not currency
- Watch less TV, avoid the propaganda
- Get more physical, hold what is rightfully yours
- Work harder, stay employed

9. Invest in family, friends and community

By far the most important resolution is to invest in your family, friends and community. A strong, cohesive, aligned, educated, purposeful, resourceful, committed and loving family unit, social group or community can meet any challenge. Take action now to invest in family, friends and community - the foundation of success.

- Ditch your advisor, think and act critically and independently
- Change your psychology to sell stocks on rallies
- Become trendy, get gold
- Gamble less. Focus on return of money not return on money
- Pay off your debt and save real money, not currency
- Watch less TV, avoid the propaganda
- Get more physical, hold what is rightfully yours
- Work harder, stay employed
- Invest in family, friends and community - the foundation of success

2008 can be best described as the year of crisis. Each crisis was managed by some form of monetisation and explained away by the multilevel cheerleaders as "the bottom". I am still trying to work out how a debt problem can be solved by more debt, but that's a topic for another day. When you sit back and look at the crisis beginning with Northern rock in August 2007, it is very clear that each problem increases in size and the interval between events is diminishing. Despite the CNBC muppets, financial insiders and government calling a bottom I'm not so sure. An Obama rally for a few months maybe but we have not seen the ultimate bottom yet.

Ask most financial experts and they will say with a high degree of confidence that most of the "bad news" is now behind us and markets have fully discounted the consequences so 2009 shapes up as a bullish year for stocks. After all central banks and governments have saved us from the abyss several times: subprime, Bear Stearns, Fannie & Freddie, Northern Rock, IndyMac Bank, AIG, Lehmann Brothers, Iceland, Madoff etc etc. We have had bailouts, nationalisations, shotgun mergers, stimulus packages, infrastructure spending programs, interest rate cuts, monetisation of debt, quantitative easing and money printing Wiemar style. Add in Obama as the saviour of the free world and how could things not be on the improve?

The financial world is full of opinions about the future that are completely wrong and never held to account. As an example last years Barron's economic round table included some of the best and brightest financial minds providing a forecast for the S&P500 by year end 2008. The highest forecast was 1750 and the lowest was 1500. With 2 trading days remaining in 2008 the S&P sits at about 850. A fair miss! However when you think about the incentives for the so called experts in the financial industry their overly bullish bias should not be a surprise. After all they and the firms they work for generate much more income in rising markets than falling ones.

Another aspect of this bullish bias played out in an almost comedic fashion in 2008. CNBC, the chief cheer leading investotainment channel, presented guest after guest who predicted the bottom was in. Full credit to their consistency of purpose as evidently the bottom was in for stocks at Dow 13,000, 12,000, 11,000, 10,000, 9000 and finally 8,000. Lead muppet Larry Kudlow and his goldilocks economic theory is such a goose I am surprised that CNBC management still roll him out. Again when you look at the incentives, CNBC profitability is enhanced when market participation is highest, and that occurs in rising markets. Their bullish bias should be no surprise.

Finally we come to the Treasury and the Fed. What a year. Hank Paulson and Ben Bernanke have been the commanders in chief of cheer leading. The worst was behind us after subprime and Bear Sterns, Fannie and Freddie are fine and well capitalised, housing prices have bottomed, the American economy is not in recession, the banking system is sound and the now famous "give me a bazooka but I won't need it" speech. As Jim Rogers so eloquently puts it "if I came onto Bloomberg 100 weeks in a row and was completely wrong would you invite me back?" Who is holding these guys to account? Some of the statements made under oath by Bernanke and Paulson mean they are liars or stupid, and I'm fairly certain you don't become Treasury Secretary of Chairman of the Fed being stupid. To be fair, markets are a confidence game so some level of optimism in a crisis is warranted but in reality the multi level cheer leading and unwillingness to take short term pain will have much larger consequences in the future.

So what might be the next crisis? I think Credit Default Swaps (CDS) will be the big story of 2009. CDS will dwarf all previous crisis events and if the cheerleaders run out of fingers to plug holes in the dyke 2009 will be an historic year for all the wrong reasons. Please read the following article on CDS Derivatives by Ellen Brown and then ask yourself a few simple questions:

1. Have the experts, media or governments called it right so far?
2. Are the problem events diminishing in size or time interval?
3. Do you think Madoff is the only ponzi scheme? (think US government)
4. When the game of musical chairs stops who will be holding the toxic derivatives?
5. How can governments pay for all the bailouts without raising taxes?
6. Are you aware bail outs, monetisation, quantitative easing, stimulus etc equals money printing?
7. Are you aware money printing equals inflation?
8. Are you aware inflation is a hidden tax?
9. Are you aware gold and silver are best way to protect your family and wealth
10.Do you know time is running out to act?

IT’S THE DERIVATIVES, STUPID!
Ellen Brown, September 18, 2008

“I can calculate the movement of the stars, but not the madness of men.”
– Sir Isaac Newton, after losing a fortune in the South Sea bubble

Something extraordinary is going on with these government bailouts. In March 2008, the Federal Reserve extended a $55 billion loan to JPMorgan to “rescue” investment bank Bear Stearns from bankruptcy, a highly controversial move that tested the limits of the Federal Reserve Act. On September 7, 2008, the U.S. government seized private mortgage giants Fannie Mae and Freddie Mac and imposed a conservatorship, a form of bankruptcy; but rather than let the bankruptcy court sort out the assets among the claimants, the Treasury extended an unlimited credit line to the insolvent corporations and said it would exercise its authority to buy their stock, effectively nationalizing them. Now the Federal Reserve has announced that it is giving an $85 billion loan to American International Group (AIG), the world’s largest insurance company, in exchange for a nearly 80% stake in the insurer . . . .

The Fed is buying an insurance company? Where exactly is that covered in the Federal Reserve Act? The Associated Press calls it a “government takeover,” but this is not your ordinary “nationalization” like the purchase of Fannie/Freddie stock by the U.S. Treasury. The Federal Reserve has the power to print the national money supply, but it is not actually a part of the U.S. government. It is a private banking corporation owned by a consortium of private banks. The banking industry just bought the world’s largest insurance company, and they used federal money to do it. Yahoo Finance reported on September 17:

“The Treasury is setting up a temporary financing program at the Fed’s request. The program will auction Treasury bills to raise cash for the Fed’s use. The initiative aims to help the Fed manage its balance sheet following its efforts to enhance its liquidity facilities over the previous few quarters.”

Treasury bills are the I.O.U.s of the federal government. We the taxpayers are on the hook for the Fed’s “enhanced liquidity facilities,” meaning the loans it has been making to everyone in sight, bank or non-bank, exercising obscure provisions in the Federal Reserve Act that may or may not say they can do it. What’s going on here? Why not let the free market work? Bankruptcy courts know how to sort out assets and reorganize companies so they can operate again. Why the extraordinary measures for Fannie, Freddie and AIG?

The answer may have less to do with saving the insurance business, the housing market, or the Chinese investors clamoring for a bailout than with the greatest Ponzi scheme in history, one that is holding up the entire private global banking system. What had to be saved at all costs was not housing or the dollar but the financial derivatives industry; and the precipice from which it had to be saved was an “event of default” that could have collapsed a quadrillion dollar derivatives bubble, a collapse that could take the entire global banking system down with it.

The Anatomy of a Bubble
Until recently, most people had never even heard of derivatives; but in terms of money traded, these investments represent the biggest financial market in the world. Derivatives are financial instruments that have no intrinsic value but derive their value from something else. Basically, they are just bets. You can “hedge your bet” that something you own will go up by placing a side bet that it will go down. “Hedge funds” hedge bets in the derivatives market. Bets can be placed on anything, from the price of tea in China to the movements of specific markets.

“The point everyone misses,” wrote economist Robert Chapman a decade ago, “is that buying derivatives is not investing. It is gambling, insurance and high stakes bookmaking. Derivatives create nothing.”1 They not only create nothing, but they serve to enrich non-producers at the expense of the people who do create real goods and services. In congressional hearings in the early 1990s, derivatives trading was challenged as being an illegal form of gambling. But the practice was legitimized by Fed Chairman Alan Greenspan, who not only lent legal and regulatory support to the trade but actively promoted derivatives as a way to improve “risk management.” Partly, this was to boost the flagging profits of the banks; and at the larger banks and dealers, it worked. But the cost was an increase in risk to the financial system as a whole.2

Since then, derivative trades have grown exponentially, until now they are larger than the entire global economy. The Bank for International Settlements recently reported that total derivatives trades exceeded one quadrillion dollars – that’s 1,000 trillion dollars.3 How is that figure even possible? The gross domestic product of all the countries in the world is only about 60 trillion dollars. The answer is that gamblers can bet as much as they want. They can bet money they don’t have, and that is where the huge increase in risk comes in.

Credit default swaps (CDS) are the most widely traded form of credit derivative. CDS are bets between two parties on whether or not a company will default on its bonds. In a typical default swap, the “protection buyer” gets a large payoff from the “protection seller” if the company defaults within a certain period of time, while the “protection seller” collects periodic payments from the “protection buyer” for assuming the risk of default. CDS thus resemble insurance policies, but there is no requirement to actually hold any asset or suffer any loss, so CDS are widely used just to increase profits by gambling on market changes. In one blogger’s example, a hedge fund could sit back and collect $320,000 a year in premiums just for selling “protection” on a risky BBB junk bond. The premiums are “free” money – free until the bond actually goes into default, when the hedge fund could be on the hook for $100 million in claims.

And there’s the catch: what if the hedge fund doesn’t have the $100 million? The fund’s corporate shell or limited partnership is put into bankruptcy; but both parties are claiming the derivative as an asset on their books, which they now have to write down. Players who have “hedged their bets” by betting both ways cannot collect on their winning bets; and that means they cannot afford to pay their losing bets, causing other players to also default on their bets.

The dominos go down in a cascade of cross-defaults that infects the whole banking industry and jeopardizes the global pyramid scheme. The potential for this sort of nuclear reaction was what prompted billionaire investor Warren Buffett to call derivatives “weapons of financial mass destruction.” It is also why the banking system cannot let a major derivatives player go down, and it is the banking system that calls the shots. The Federal Reserve is literally owned by a conglomerate of banks; and Hank Paulson, who heads the U.S. Treasury, entered that position through the revolving door of investment bank Goldman Sachs, where he was formerly CEO.

The Best Game in Town
In an article on FinancialSense.com on September 9, Daniel Amerman maintains that the government’s takeover of Fannie Mae and Freddie Mac was not actually a bailout of the mortgage giants. It was a bailout of the financial derivatives industry, which was faced with a $1.4 trillion “event of default” that could have bankrupted Wall Street and much of the rest of the financial world. To explain the enormous risk involved, Amerman posits a scenario in which the mortgage giants are not bailed out by the government. When they default on the $5 trillion in bonds and mortgage-backed securities they own or guarantee, settlements are immediately triggered on $1.4 trillion in credit default swaps entered into by major financial firms, which have promised to make good on Fannie/Freddie defaulted bonds in return for very lucrative fee income and multi-million dollar bonuses. The value of the vulnerable bonds plummets by 70%, causing $1 trillion (70% of $1.4 trillion) to be due to the “protection buyers.” This is more money, however, than the already-strapped financial institutions have to spare. The CDS sellers are highly leveraged themselves, which means they depend on huge day-to-day lines of credit just to stay afloat. When their creditors see the trillion dollar hit coming, they pull their financing, leaving the strapped institutions with massive portfolios of illiquid assets. The dreaded cascade of cross-defaults begins, until nearly every major investment bank and commercial bank is unable to meet its obligations. This triggers another massive round of CDS events, going to $10 trillion, then $20 trillion. The financial centers become insolvent, the markets have to be shut down, and when they open months later, the stock market has been crushed. The federal government and the financiers pulling its strings naturally feel compelled to step in to prevent such a disaster, even though this rewards the profligate speculators at the expense of the Fannie/Freddie shareholders who will get wiped out. Amerman concludes:

“[I]t’s the best game in town. Take a huge amount of risk, be paid exceedingly well for it and if you screw up -- you have absolute proof that the government will come in and bail you out at the expense of the rest of the population (who did not share in your profits in the first place).”4

Desperate Measures for Desperate Times
It was the best game in town until September 14, when Treasury Secretary Paulson, Fed Chairman Ben Bernanke, and New York Fed Head Tim Geithner closed the bailout window to Lehman Brothers, a 158-year-old Wall Street investment firm and major derivatives player. Why? “There is no political will for a federal bailout,” said Geithner. Bailing out Fannie and Freddie had created a furor of protest, and the taxpayers could not afford to underwrite the whole quadrillion dollar derivatives bubble. The line had to be drawn somewhere, and this was apparently it.

Or was the Fed just saving its ammunition for AIG? Recent downgrades in AIG’s ratings meant that the counterparties to its massive derivatives contracts could force it to come up with $10.5 billion in additional capital reserves immediately or file for bankruptcy. Treasury Secretary Paulson resisted advancing taxpayer money; but on Monday, September 15, stock trading was ugly, with the S & P 500 registering the largest one-day percent drop since September 11, 2001. Alan Kohler wrote in the Australian Business Spectator:

“[I]t’s unlikely to be a slow-motion train wreck this time. With Lehman in liquidation, and Washington Mutual and AIG on the brink, the credit market would likely shut down entirely and interbank lending would cease.”5

Kohler quoted the September 14 newsletter of Professor Nouriel Roubini, who has a popular website called Global EconoMonitor. Roubini warned:

“What we are facing now is the beginning of the unravelling and collapse of the entire shadow financial system, a system of institutions (broker dealers, hedge funds, private equity funds, SIVs, conduits, etc.) that look like banks (as they borrow short, are highly leveraged and lend and invest long and in illiquid ways) and thus are highly vulnerable to bank-like runs; but unlike banks they are not properly regulated and supervised, they don’t have access to deposit insurance and don’t have access to the lender of last resort support of the central bank.”

The risk posed to the system was evidently too great. On September 16, while Barclay’s Bank was offering to buy the banking divisions of Lehman Brothers, the Federal Reserve agreed to bail out AIG in return for 80% of its stock. Why the Federal Reserve instead of the U.S. Treasury? Perhaps because the Treasury would take too much heat for putting yet more taxpayer money on the line. The Federal Reserve could do it quietly through its “Open Market Operations,” the ruse by which it “monetizes” government debt, turning Treasury bills (government I.O.U.s) into dollars. The taxpayers would still have to pick up the tab, but the Federal Reserve would not have to get approval from Congress first.

Time for a 21st Century New Deal?
Another hole has been plugged in a very leaky boat, keeping it afloat another day; but how long can these stopgap measures be sustained? Professor Roubini maintains:

“The step by step, ad hoc and non-holistic approach of Fed and Treasury to crisis management has been a failure. . . . [P]lugging and filling one hole at [a] time is useless when the entire system of levies is collapsing in the perfect financial storm of the century. A much more radical, holistic and systemic approach to crisis management is now necessary.”6

We may soon hear that “the credit market is frozen” – that there is no money to keep homeowners in their homes, workers gainfully employed, or infrastructure maintained. But this is not true. The underlying source of all money is government credit – our own public credit. We don’t need to borrow it from the Chinese or the Saudis or private banks. The government can issue its own credit – the “full faith and credit of the United States.” That was the model followed by the Pennsylvania colonists in the eighteenth century, and it worked brilliantly well. Before the provincial government came up with this plan, the Pennsylvania economy was languishing. There was little gold to conduct trade, and the British bankers were charging 8% interest to borrow what was available. The government solved the credit problem by issuing and lending its own paper scrip. A publicly-owned bank lent the money to farmers at 5% interest. The money was returned to the government, preventing inflation; and the interest paid the government’s expenses, replacing taxes. During the period the system was in place, the economy flourished, prices remained stable, and the Pennsylvania colonists paid no taxes at all. (For more on this, see E. Brown, “Sustainable Energy Development: How Costs Can Be Cut in Half,” webofdebt.com/articles, November 5, 2007.)

Today’s credit crisis is very similar to that facing Herbert Hoover and Franklin Roosevelt in the 1930s. In 1932, President Hoover set up the Reconstruction Finance Corporation (RFC) as a federally-owned bank that would bail out commercial banks by extending loans to them, much as the privately-owned Federal Reserve is doing today. But like today, Hoover’s ploy failed. The banks did not need more loans; they were already drowning in debt. They needed customers with money to spend and invest. President Roosevelt used Hoover’s new government-owned lending facility to extend loans where they were needed most – for housing, agriculture and industry. Many new federal agencies were set up and funded by the RFC, including the HOLC (Home Owners Loan Corporation) and Fannie Mae (the Federal National Mortgage Association, which was then a government-owned agency). In the 1940s, the RFC went into overdrive funding the infrastructure necessary for the U.S. to participate in World War II, setting the country up with the infrastructure it needed to become the world’s industrial leader after the war.

The RFC was a government-owned bank that sidestepped the privately-owned Federal Reserve; but unlike the Pennsylvania provincial government, which originated the money it lent, the RFC had to borrow the money first. The RFC was funded by issuing government bonds and relending the proceeds. Then as now, new money entered the money supply chiefly in the form of private bank loans. In a “fractional reserve” banking system, banks are allowed to lend their “reserves” many times over, effectively multiplying the amount of money in circulation. Today a system of public banks might be set up on the model of the RFC to fund productive endeavors – industry, agriculture, housing, energy -- but we could go a step further than the RFC and give the new public banks the power to create credit themselves, just as the Pennsylvania government did and as private banks do now. At the rate banks are going into FDIC receivership, the federal government will soon own a string of banks, which it might as well put to productive use. Establishing a new RFC might be an easier move politically than trying to nationalize the Federal Reserve, but that is what should properly, logically be done. If we the taxpayers are putting up the money for the Fed to own the world’s largest insurance company, we should own the Fed.

Proposals for reforming the banking system are not even on the radar screen of Prime Time politics today; but the current system is collapsing at train-wreck speed, and the “change” called for in Washington may soon be taking a direction undreamt of a few years ago. We need to stop funding the culprits who brought us this debacle at our expense. We need a public banking system that makes a cost-effective credit mechanism available for homeowners, manufacturing, renewable energy, and infrastructure; and the first step to making it cost-effective is to strip out the swarms of gamblers, fraudsters and profiteers now gaming the system.

Today marks the 4 year anniversary of one of the wost natural disasters in human history. On December 26th 2004 a Tsunami, caused by an earthquake in the Indian Ocean, devastated heavily populated coastal areas of Asia and Africa. According to the United Nations 229,866 people are lost, dead or missing as a direct result of the Tsunami. Including delayed impacts, such as disease and fatal injury, the death toll is estimated to be greater than 350,000.

Our thoughts and prayers go out to the individuals, families, communities and nations impacted by this horrific event.

At the time no warning systems existed in the Indian Ocean. If initial seismology readings were connected to a warning system most people would have had 30 minutes to several hours to evacuate to higher ground. The death toll could have been dramatically lower. Today Tsunami warning systems have been established across the Indian Ocean and connected regions.

Even without this early warning system the death toll could have been dramatically reduced. Tsunamis have a very distinct behavioural pattern. The first part of a tsunami to reach land is a trough (draw back) rather than a crest of the wave, the water along the shoreline may recede dramatically, exposing areas that are normally always submerged. This can serve as an advance warning of the approaching tsunami.

As I reflect on the warnings and terrible consequences of the Asian disaster, I can’t help draw parallels to an inflation tsunami headed our way. The warning signs have been there all along: loose monetary policy, asset bubbles, competitive currency devaluations, bail outs, excessive debt and leverage, lax or even corrupt regulatory oversight, excessive government and manipulated asset markets.

Jens O Parssons in the Dying of Money: Lessons of the Great German & American Inflations (Wellspring Press, 1974, p.71) best describes the initial ignorance, early warning signs and final consequences of inflation.
"Everyone loves an early inflation. The effects at the beginning of inflation are all good. There is steepened money expansion, rising government spending, increased government budget deficits, booming stock markets, and spectacular general prosperity, all in the midst of temporarily stable prices. Everyone benefits, and no one pays. That is the early part of the cycle. In the later inflation, on the other hand, the effects are all bad. The government may steadily increase the money inflation in order to stave off the latter effects, but the latter effects patiently wait. In the terminal inflation, there is faltering prosperity, tightness of money, falling stock markets, rising taxes, still larger government deficits, and still roaring money expansion, now accompanied by soaring prices and ineffectiveness of all traditional remedies. Everyone pays and no one benefits. That is the full cycle of every inflation"

For the many deflationists out there take particular note of the Parssons comments re faltering prosperity and tightness of money. This is a normal phase of inflation. Using the tsunami parallel first the ocean disappears (draw back) and its all sand for miles in front of you then out of nowhere appears a giant wall of water 10 stories high.

Right now most people are standing on the beach saying “where has all the water (cash) gone?” Those well studied on the patterns of tsunamis understand what this signals and have moved their families to higher ground by protecting themselves with physical gold and silver.