Labor Fraud, Dollar Illusions

& the Chinese Challenge Posted October 11, 2014

By www.chuckcoppes.com

"The boom is called good business, prosperity, and upswing. Its unavoidable

aftermath [the bust], the readjustment of conditions to the real data of the market,

is called crisis, slump, bad business and depression.”

- Ludwig von Mises (1881-1973)

"There is no means of avoiding the final collapse of a boom brought about by

credit expansion. The alternative is only whether the crisis should come sooner as a

result of a voluntary abandonment of further credit expansion, or later as a final

and total catastrophe of the currency system involved.”

- Ludwig von Mises, Most Famous Quote

“The process by which banks create money is so simple that the mind is repelled.”

- John Kenneth Galbraith, Money: Whence it Came, where it Went

“You know, credibility at the Fed is about subtleties and about

perceptions, as opposed to reality.”

- Mike Silva, Chief Federal Regulator (9/14)

Weekend Greetings to All,

Yep, it is time for another dose of reality – as opposed to “subtleties and perceptions” as quoted

above. More on that in my conclusion. Last week the Labor Dept. issued their fraudulent “Jobs

Report” which indicated unemployment dropped below 6% - the lowest since 2008! “There is a

lot of good stuff happening in the economy right now,” enthused Obama, “ but what we all know

is, there are still some challenges.” What kind of challenges? The fact that US jobs have been

outsourced and 92.5 million people are facing structural unemployment. The new normal.

The labor participation rate is at an historical low and the real unemployment figure is close to

23% according to ShadowStats.com. Adding a paltry 248,000 jobs is a drop in the bucket when

literally millions of jobs are needed. With the November elections right around the corner these

kind of reports are highly suspect; and all the while the Fed wants to take credit for its so-called

“dual mandate” of full employment and price stability. As noted in the chart at the top, the real

mandate the Fed has (since 1913) is to help fellow banksters/brokers on Wall Street and push up

stock indexes with massive credit expansion. Here is a short piece on how the casino works:

How the Stock Market is Rigged with High Frequency Traders:

http://seekingalpha.com/article/2535525-this-chart-shows-how-you-get-screwed-in-the-

stock-market?ifp=0

Markets Surge as Fed Comes To The Rescue!

Oct. 8, 2014, 2:00 PM, www.businessinsider.com

The above headline is from the latest FOMC minutes from the Fed that assured Wall Street

traders, hedge funds, speculators and market riggers that they would not raise interest rates until

2015 or later. In other words, the reckoning day can be postponed and time to keep celebrating!

Is this a real market? Not hardly. Notice the extreme divergence between the S&P 500 and US

unemployment starting in 2008. The Fed’s QE and Zero Interest Rate Policy (ZIRP) is a very

desperate attempt to boost the illusion of a strong US market and economic recovery (lot’s of

good stuff happening), and especially to expand credit and keep the 10-Yr Treasury Yield low.

Why is this? As financial expert Dan Amerman explains below, it is to avoid extreme debt

repayment, and this is very harmful to folks on fixed incomes and pensions. Note his reasoning:

Can A Nation $17 Trillion in Debt Afford

Higher Interest Rates & Will This Change

Our Retirements? by Daniel R. Amerman, CFA, http://danielamerman.com/va/Conflict.html

The United States federal government currently has about $17.5 trillion in recognized debt

outstanding. What this means is that if the interest rate on that debt were to rise by even 1%, the

annual federal deficit rises by $175 billion. A 2% increase in interest rate levels would increase

the federal deficit by $350 billion, and if rates were 5% higher, the annual federal deficit rises by

$875 billion. Clearly, the federal government cannot afford substantially higher interest rates. At

the very same time, because of the current extremely low interest rate environment, tens of millions

of retirees and long term investors have seen their returns slashed, with potential reductions in their

standards of living as well. Could it be there is a fundamental clash between the financial interests

of the federal government and the financial well-being of long term retirement investors?

A Mysterious Reduction in Interest Payments

The graph below shows the amount of federal debt outstanding over the last 40 years. As can easily

be seen, the federal debt exploded upwards with the financial crisis of 2008:

Now ordinarily if we think about having our debts balloon out of control, we would expect to be

making much higher interest payments. All else being equal, if our debt doubles or triples then

our interest payments should double or triple. However, as can be seen in the graph below, this

hasn't happened for the US government.

Indeed, interest payments by the federal government have either been falling or level ever since

the financial crisis began. How can this be?

The answer, as plainly seen in the graph, is that interest rates have in recent years plunged to their

lowest levels in the last 40 years. At the very same time, savers and investors have of course also

been experiencing these very low interest rates.

The Real Reason for Quantitative Easing

Now if the federal government were an individual, one might think that this was extraordinarily

good luck. To have interest rates plunging even as the amount of debt outstanding was soaring

upwards. And generally speaking, this is where a lot of confusion can occur when trying to

understand the debt and the deficit, because indebted national governments which can borrow in

their own currencies are nothing whatsoever like individuals or corporations being in debt. In the

case of the United States, interest rates have been controlled for some years now through the

Federal Reserve and its program of quantitative easing. As illustrated in the graph below, at

the very same time that the federal deficit has been soaring, the Federal Reserve has been creating

quite literally trillions of dollars out of the nothingness and using this newly created money to

purchase United States debt – not directly from the US government, but through the markets.

In doing so, the Fed has taken control of interest rates in the short term, medium term and

long term in the United States. There is nothing fortuitous or lucky about the low interest rates,

but rather the government is dealing with a huge problem that it has with a very high debt level

through quite deliberately taking control of interest rates and keeping them very low. As explained

more in depth here, the true purpose behind quantitative easing the entire time has been to

reduce interest rates for the United States government and for mortgage borrowers.

Fed Policy means Tough Times for Retirees

Traditional financial planning doesn't take massive federal debts into account, nor does it take

into account the Federal Reserve creating money by the trillions to force interest rates

downwards. Instead, investors are supposed to receive market interest rates that will reward them

with a compounding of wealth before retirement, and a generous cash flow after retirement. But

if the federal government can't afford substantially higher interest rates – it could be a very, very

long time before medium and high interest rates return. And if that is the case – tens of millions

of people may never achieve the compounding of wealth they were anticipating for retirement, nor

the level of cash flow they were counting on after retirement. To continue this article click here:

http://danielamerman.com/va/Conflict.html

Put simply, the broad economic and fiscal problems in the US are structural and not cyclical. In

other words, if debt and spending got us into this problem then debt and spending will not get us

out. It is structural is the sense that we are addicted to easy money (an institutionalized Welfare

State and crony capitalism) and a jobless recovery (exported jobs and demographics). The US is

in decline, yet the US Dollar Index is having the longest rally in 40 years! What is going on here?

In times of great uncertainty (due to central planning) there is a “flight to safety” and this has

traditionally meant US dollar assets (T-bills and cash), and this time is no different. Is this a good

thing? It depends. A strong dollar (oxymoron) inversely pushes commodities down since all

commodities (like gold and silver) are priced in dollars. This is hurting Russia’s oil exports and

food inflation is running at 17% and it also hurts US exports, but the Wall Street shills at CNBC

are calling the USD the trade “du jour” – ha! In the following few articles it is noted that the

USD is vulnerable to a sharp decline as our debt pyramid continues to grow and other countries

are reducing their dollar reserves and rejecting the utility of the USD as a reserve currency. In

other words, a strong dollar is illusionary and the outlook is looking desperate. The Fed is

trapped and precious metals are your safest insurance policy as we go forward:

King Dollar Rules: Betting on the Buck Sara Eisen | @saraeisen, www.cnbc.com

Amid wild fluctuations in stocks and range-bound trading in bonds this week, the U.S. dollar

marched ever higher. The currency is set to finish another week stronger, which would mark 12-

straight weeks of gains, the longest winning streak ever. And pros say though the move has been

sharp, the uptrend is still firmly intact. First, a warning: Buying the dollar is the trade du jour.

As the U.S. economy flexes its muscles amid an increasingly uncertain global backdrop, more

investors have jumped on the strong dollar bandwagon. Weekly data from the Commodities

Futures Trading Commission show hedge funds and other large speculators' positions have

increased substantially in the past few weeks, and the net long dollar bet now stands at $35.81

billion, not far from its highest ever. The dollar is vulnerable to a painful drop when

momentum turns on any given day and trades unwind. However, it doesn't change the logic

for buying the dollar and the currency's trajectory [good luck – CHC].

Where the U.S. Dollar Is Headed and What

It Means to You Monday, October 4th, 2014, By Michael Lombardi, MBA for Profit Confidential

Special Report: The Great Crash of 2015! For the U.S. federal government’s fiscal year, which ended last month, the Congressional Budget

Office (CBO) predicts a budget deficit of $506 billion. (Source: Congressional Budget Office web

site, September 26, 2014.) But just because our annual deficit is declining, that doesn’t mean our

national debt is rising by an equal amount. In fact, between September 20, 2013 and September

20, 2014, the U.S. national debt increased by $1.0 trillion. (Source: Treasury Direct, last accessed

September 23, 2014.) And the government is expected to post budget deficits until at least 2024.

According to a report released by the CBO, the U.S. government’s budget deficits will amount to

$7.19 trillion between 2015 and 2024. (Source: Congressional Budget Office, August 27, 2014.)

That’s roughly $780 billion a year on average.

Each year the government incurs a budget deficit, it has to borrow money to pay for its expenses

and as a result, the national debt increases. With the national debt now at $17.7 trillion, adding

another $7.19 trillion takes the total to $24.89 trillion within 10 years. But as I showed you earlier

in this story, government debt is rising at a much faster pace than national debt. My prediction: a

national debt of $34.0 trillion within 10 years. For the current fiscal year, the U.S. government is

estimated to pay $430 billion in interest on the national debt. The Federal Reserve has stated it

plans to raise interest rates starting in 2015 and will continue to do so right through to 2017.

According to the CBO, interest payments on the government’s debt will triple within 10 years.

While I’m sure traders are enjoying the recent rally in the U.S. dollar, that rally is simply a product

of the Fed’s repeated announcements of higher rates ahead and the continued economic problems

in the eurozone. The reality of the matter is that the projected massive increase in the U.S. national

debt will have a material impact on the U.S. dollar. Over the past five years, we have seen central

banks around the world reduce the amount of U.S. dollars they hold as their reserve

currency. The greater a country’s national debt, the more pressure on its currency. The U.S. will

be no different. The long-term fundamentals for the greenback are poor.

US Dollar Top will Mark the Bottom for

Gold and Silver prices Posted on 05 October 2014. www.arabianmoney.com

In the past 12 weeks the US dollar has soared against the euro which has dropped from $1.36

to $1.26. That’s been great news for US tourists but a shock for precious metal investors on

the inverse side of this trade: gold prices fall as the dollar rises. Technical analysts reckon the

dollar is now close to the top of its recent rally. Anecdotally everyone is positive on the dollar and

any contrarian knows this is a danger signal: the crowd is always wrong because its enthusiasm is

unsustainable and you simply run out of buyers. If you are feeling brave next week would be a

great time to stock up on gold and silver. Was that a final capitulation move by the euro at the end

of last week? It certainly looked like it:

So if the euro is now oversold so is gold and the price will go back up and silver will follow as it

almost always does. This may not be the last shock for precious metal investors as financial

markets go on a rollercoaster ride this fall. It’s impossible to predict these moves ahead of

time, or to time them properly. That’s why long-term exposure to the precious metals makes sense.

We are entering a dark phase in financial markets when you have to pick the asset class that may

perform least badly rather than the next champion. Buying your protection insurance now in

bullion is a very smart move.

To summarize from the above, the US Dollar Index (currently 85.58) is benefiting from market

volatility and momentum trading, but the long-term outlook does not look good for the US. The

inverse pyramid above is also known as ‘Exter’s Pyramid’ named after John Exter, an economist

and former head of the NY Fed in the 1950s. It is a risk-weighted chart for different asset classes

and you can see that derivatives, real estate, stocks and bonds are on top and the lower tiers are

considered safest. Are government bonds and fiat paper money really that safe? They may be

liquid but hardly a safe bet! China certainly has no illusions about US assets and it is no secret

that they are moving away from the USD. Did you know that the European Union is China’s

largest trading partner and not the US? Yep. Here is a news story. I will comment below:

This is Huge: Chinese Renminbi becomes

Directly Tradable with the Euro sovereignman.com/ By Simon Black / October 1, 2014

The Chinese central bank, People’s Bank of China,

issued a press release announcing the authorization of direct trading between the renminbi and the

euro on the inter-bank foreign exchange market. This is huge. The euro is the second most

traded currency in the world, after the US dollar. The European Union is already China’s

biggest trading partner and this is a major step in further increasing trade and investment

ties with the EU as there is now a direct exchange rate between the two currencies, without

the need to use the US dollar as the conduit. The renminbi is quickly marching down the path

of internationalization as the Chinese currency is now directly exchangeable with the US dollar,

Australian dollar, New Zealand dollar, Japanese yen, British pound, Russian ruble, and Malaysian

ringgit. The use of renminbi in international trade settlement nearly tripled in value worldwide

over the past two years according the The Society for Worldwide International Financial

Telecommunications (SWIFT), and over one third of financial institutions around the world

already use renminbi for payments to China and Hong Kong…..READ MORE

China Housing Bubble Bursts: Q3 Land

Sales Crater by 50%

Submitted by Tyler Durden on 09/29/2014 15:45 -0400

China may be doing everything in its power to divert attention from the simple fact that it’s housing

bubble, the largest in the world in terms of both assets comprising it as well as divergence from

fair value, has burst. But while there is no clear threshold of what constitutes a bursting bubble

when it comes to housing, the latest data out of Soufun, China's largest real-estate website, which

said that land sales have dropped a massive 22% to 1.7 trillion Yuan in 2014 so far, is likely as

clear an indication as any that Beijing is about to panic. And if that was not enough Bloomberg

adds that land sales in 300 cites followed by Soufun fell almost 50% Y/Y to 415.9 billion yuan

in 3Q, while residential land sales declined more than 50% to 265.3b yuan in 3Q. So why,

aside from the obvious, is this relevant? Because recall as we reported two weeks ago when looking

at US household net worth, in the US it is all about (record) financial assets. So much so, in fact,

that financial assets as a percentage of total household assets have never been higher at

70.3%, which also means that real estate as a percentage of total is as low as it has ever been.

Meanwhile, in China few households care as much about financial assets (the ones that do are

largely a part of the Politburo or the ultra-rich oligrachy). Instead, the largest Chinese household

asset is Real Estate, which at 74.7% of total household assets, is by far the most valuable asset

that China's population has. See chart below:

China is directly trading with the EU – and this is huge in terms of macroeconomics and geo-

politics! What is also huge is the massive malinvestment of Chinese household wealth into the

real estate sector as noted in this stunning chart above. Why has this happened? In response to

the Financial Crisis of 2008 in the West, the Chinese spurred their economy with State-sponsored

building programs and this bubble has been growing ever since. Sound familiar? Prior to 2008,

real estate activity in the US comprised 16% of the economy before it burst. In contrast, real

estate speculation in China now represents 50% of the Chinese economy! As noted, this real

estate bubble is beginning to burst and this article concluded with this comment, “Once a few

hundred million Chinese wake up and realize that the "wealth effect" portrayed by the blue bar

above has been obliterated, the riots currently taking place in Hong Kong will be a gentle warm

up for what the People's Liberation Army will be about to face.” So where is smart money going

in China? As covered in this report out of China (below) there is record demand for gold and

silver, and this has everything to do with The Shanghai Gold Exchange and Futures Exchange

that are settling in physical metals as I reported in my last newsletter. The following is some

technical analysis and I will insert some commentary. This is extremely important to know:

Chinese Gold Demand is Explosive! Koos Jansen, September 27, 2014, Bullion Star, www.bullionstar.com

Whilst western media are still under the assumption Chinese gold demand is declining, based on

data from the World Gold Council and net gold export from Hong Kong to China mainland, in

reality demand is extremely strong. The lower the price of gold will go the more physical

gold will be purchased by the Chinese people, and the price of gold has been dropping.

Wholesale demand, measured by withdrawals from the SGE vaults, accounted for an

astonishing 50.3 tonnes in week 38 (September 15 -19), up 22.79 % w/w. Year to date SGE

withdrawals stand at 1381 tonnes. Exactly one year ago I wrote my first analysis about the

structure of the Chinese gold market and the relationship between Chinese wholesale demand and

withdrawals from the SGE vaults. Since then this understanding, strengthened by more

research and proof, has gradually spread through the gold space. Additionally it has been

noticed below the surface by investors, banks, and hedge funds worldwide; often I get inquiries

from professionals of all corners of the financial industry regarding the Chinese gold market. There

is no doubt in my mind the true numbers on Chinese gold demand will eventually reach the

mainstream media. To understand China’s real physical gold demand, investors should simply

look at the weekly withdrawals from Shanghai Gold Exchange vaults [a Five Yr. Chart]:

Remarkably the discount of Shanghai silver has stabilized recently instead of declining. The

trend has been a declining discount of silver in Shanghai (relative to London) when the silver price

lowers, and vice versa. That trend seems to have been broken now. [What this means is that silver

is trading at a premium in China and this also means that silver is in backwardation – a term used

when traders are willing to pay more for physical silver now rather than wait for a price in the

futures market, which also means that people want the physical now and not later! – CHC].

Silver inventory on the SHFE has dropped 9 %, to 81 tonnes, the last data we have from the

SGE is they hold only 67 tonnes of silver inventory! I would also like to stress that most physical

silver in Shanghai is not traded over the SHFE or SGE but through the Shanghai White Platinum

& Silver Exchange (WPSE). [This is a dramatic 95% drop in just 18 months! – CHC].

Silver volume traded on the SHFE was up 190 %, at 67,328 tonnes from 23,23 tonnes

(transcending COMEX volumes). Volume on the SGE was up 284 %, at 8,891 tonnes from

2,314. In the past week 44,459 tonnes of silver changed hands on the COMEX. The Open Interest

(OI) on the COMEX dropped a little from 26,984 to 26,122. [What this means is that the Chinese

exchanges have now exceeded the volume traded at COMEX (CRIMEX) in NY – see the red

lines below – and this has quietly taken place in the last month or so! – CHC]:

So what does all this mean? It means that China is moving in position to directly challenge NY

and London for physical settlement of gold and silver. These exchanges were opened in 2003,

but last month they began a new mechanism for genuine price discovery of metals instead of the

fraudulent naked-shorting, spoofing and HFT that goes on in the West – and who can blame

them? Just look at the huge reductions in their gold and silver inventories in these charts above!

The gold vaults are being emptied and silver inventory has gone from 1,200 tons in 2013 down

to a mere 67 tons! To put that into perspective, 67 tons is worth around $35 billion and according

to the Forbes annual World’s Billionaires 2014 Edition there are 1,645 billionaires on the list

who could easily buy all the above ground silver in the world. According to Bill Holter, these

exchanges in China could lead to global arbitrage (taking advantage of price differences), and

this could put extreme pressure on NY and London warehouses. Wow! Check it out:

Must Read: Two-Tiered Market for Silver could empty COMEX!

http://blog.milesfranklin.com/silver-arbitrage

Not only does China want price discovery for gold and silver, according to this headline they want

price discovery in everything! This is a reference to all base metals along with gold and silver:

China wants say in ‘price discovery’ in

Everything gata.org / By William Barkshire. Financial Times, London / October 7, 2014

What is really at stake here is best summed up by none other than John Maynard Keynes:

"If, however, a government refrains from regulations

and allows matters to take their course, essential

commodities soon attain a level of price out of the

reach of all but the rich, the worthlessness of the

money becomes apparent, and the fraud upon the

public can be concealed no longer."

John Maynard

Keynes, The

Economic

Consequences of the

Peace, 1920, page

240

Did you get that? Let me translate: In an investment environment where people are seeking

valuable commodities apart from regulations and rigging these essential commodities achieve

new price levels that only the wealthy can afford, and the worthlessness of the fiat paper money

and fraudulent fractional reserve banking system is exposed for all to see. Of course, the new

wealthy class will be those who obtain the essential commodities NOW! I have been predicting

delivery defaults at the NY and London warehouses for the past year. I urge you to listen to the

following interview (25 minutes) predicting delivery defaults yet this year. Click below:

Greg Hunter Interview with Rob Kirby on Coming Delivery Defaults – Listen to This!

http://goldsilver.com/video/rob-kirby-physical-gold-and-silver-contracts-default-in-2014/

Are you getting the sense of urgency? You can be sure that the Fed and criminal banksters are

sensing the urgency to continue suppressing metals in order to provide the “illusion” that owning

precious metals is “not as good” as paper assets as noted in this brief comment below:

Demand for Physical Gold Remains Strong

as Bullion Banks Suppress Prices David Levenstein | September 30, 2014 |

September has been a poor month for precious metals. Gold is down 5.2%, despite it being gold’s

strongest month from a seasonal perspective. The price fall means that gold is heading for the first

quarterly loss this year. As a dollar-driven rally spurred by U.S. economic growth and after the

U.S. Federal Reserve indicated it could raise interest rates sooner than expected earlier this month,

gold prices have come under pressure for the entire month of September. However, as there has

not been any dumping of the physical metal and as demand remains relatively robust one

can surmise that this selling can only be the nefarious activities of the large bullion banks

trying to suppress the price of the yellow metal once again and thus give the general public

that illusion that owing gold is not as good as owning the U.S. dollar or equities. The Federal

Reserve and its bullion bank agents (JP Morgan, Scotia, and HSBC) have been using naked

short-selling to drive down the price of gold since September 2011. The latest containment

effort began in mid-July of this year, after gold had moved higher in price from the beginning of

June and was threatening to take out key technical levels, which would have triggered a flood of

buying from hedge funds. The Fed and its agents rig the gold price in the New York Comex

futures (paper gold) market. The bullion banks have the ability to print an unlimited supply of gold

contracts which are sold in large volumes at times when Comex activity is light.

War on Gold Accelerates As US Trading

Partners Flee the Dollar

kingworldnews.com / October 5, 2014

Today a legend who was recently asked by the Chinese government to give a speech to

government officials in China told King World News that the war in the gold market is now

accelerating as America’s trading partners are fleeing the U.S. dollar. John Ing, who has been

in the business for 43 years, also spoke about the currency wars which are breaking out that will

only add fuel to the global fire. Ing: “The U.S. jobs numbers hit the gold market and it has now

broken $1,200 to the downside. It looks as if gold will retest that $1,180 level, which has been an

all-important support point….READ MORE

Meanwhile, foreigners are fleeing the US dollar and now the Swiss are voting to return gold back

into their system. What is this about? Seems that the normally prudent Swiss have allowed the

Swiss National Bank to print up too many Francs and things are about to go critical. Here it is:

The Swiss “Gold Initiative” Referendum

will be on November 30, 2014 http://goldswitzerland.com/will-this-save-the-swiss-financial-system/

On November 30th the Swiss will vote on:

1. Returning their national gold which is held abroad back to Switzerland

2. Requiring the Swiss National Bank to hold 20% of their assets in physical gold

3. Prohibiting further gold sales

So why is this referendum so important? Because Switzerland has, for hundreds of years, been

a bastion of sound monetary policy and low inflation. But this has gradually changed in the last

100 years since the creation of the Fed in the US and especially during the past 15 years when the

Swiss government quietly removed the 40% gold backing from the revised Federal Constitution

which was adopted by popular vote in 1999. No paper currency has ever survived throughout

history in its original form. And the Swiss Franc from having been a strong currency is now in

the process of being slowly destroyed by the recent policies of the Swiss National Bank (SNB).

Since 2008 the SNB’s balance sheet has expanded 5 times from CHF 100 Billion to CHF 500

Billion (see the above chart). So Switzerland has printed around 400 Billion Swiss Francs in the

last 6 years in order to hold its currency down against the Euro and other currencies. CHF 400

Billion is around 2/3 of GDP. This means that Switzerland has printed more money,

relatively, than any major country in the world in the last 6 years!

This Swiss Referendum is very important for one reason. This is a confidence vote and you can

be sure that all the central banks will be watching! Equally important is the fact that the Fourth

Central Bank Gold Agreement was signed in Europe on May 19th and has gone into effect on

September 27th, 2014. Starting in 1999, the European central banks all agree on how much gold

they will sell in the next five years. As this chart reveals below these banks are NOT selling, but

buying! What does that tell you? They are preparing for big gains, and so should you:

Gold: Time to Prepare for Big Gains? caseyresearch.com / October 8, 2014

Years of a severe downturn in the gold market have left very few bulls to speak out in favor of the

yellow metal. Here are some positive opinions on the future of the precious metal, from the

recently concluded Casey Research Fall Summit. David Tice, founder of the Prudent Bear Fund,

believes we are heading for a “global currency reset” that will reduce the role of the dollar in

global trade. Central banks, he says, don’t possess all the gold they claim to, and the unwinding of

the paper gold market probably isn’t far down the road—it could even ignite the next major

crisis. The paper gold market has massive leverage, with a ratio of 90:1 or 100:1 of paper claims

on gold bullion. If only a small fraction of owners convert their paper to physical gold, says Tice,

it will create a “no bid” price environment and cause the price of gold to explode. He believes that

once the paper gold market collapses, gold will be priced on the basis of supply/demand for the

physical metal—which means it could be headed for $3,000 to $8,000 per ounce [the gains in

silver will be even more spectacular-CHC]. READ MORE

As indicated in this excerpt above, paper gold and paper money is illusionary wealth, and I agree

with Casey Research that we are heading for a global monetary reset and this could be ignited

by delivery defaults in the West and East along with capitulation in capital markets. I will

conclude with this timely and prophetic theme in a moment. However, it is now time to take a

rational look at silver for investors and the outlook for historic gains in the white metal:

A Rational Look at Silver for Investors Tuesday, October 7th, 2014, By Michael Lombardi, MBA for www.ProfitConfidential.com

As silver prices started to decline last year, silver mining companies halted projects where costs

were too high in relation to the new reality of silver prices. According to a report produced for the

Silver Institute and created by Thomson Reuters GFMS, in 2013, the silver supply fell to 985.1

million ounces, down from 1,005.3 million ounces a year earlier—a two-percent drop in

production. But demand for silver was increasing over the same period. While silver prices were

declining, demand for silver in 2013 increased 13% to 1,081 million ounces, compared to 954

million ounces in 2012. Demand for silver coins and bars jumped 76% in 2013 over 2012! As

silver prices fell, investors bought more silver. The chart below compares gold bullion prices

(golden line) and silver prices (grey line) over the last year.

Chart courtesy of www.StockCharts.com

Looking at this chart above, you will make one key observation: while gold bullion prices still

remain above their December 2013 lows, silver prices have broken below their 2013 lows and are

down more than 10% year-to-date. Looking at this, I ask: has anything changed for silver?

The only change is that the media is telling us the economy is doing better; hence, investors

are not buying into the precious metal sector. But the reality of the situation is that the

supply of silver in the market is declining, while demand is rising by the double-digits.

Pessimism towards the “poor man’s gold” has gone too far. In fact, I’m expecting silver to provide

investors with a better return than gold bullion over the next 24 months. If gold bullion prices

were to return to their high of $1,900 an ounce, the gain from today’s gold bullion prices would

be 60%. If silver were to return to its high of $50.00 an ounce (achieved in 2011)—the gains

from silver’s current trading level would be 194%. The more the precious metal mining sector

is shunned by investors, the greater the opportunity. The shares of well-known silver miners are

selling for deep discounts. I don’t believe these prices will stay low for much longer……

Now folks, normally when you have increased and record demand for any item or commodity

it has to bid up the price, right? Wrong! In 2012, 2013 and 2014 demand for silver has been

sustained while the supply has been dwindling, and yet prices are lagging on the spot index. By

now I don’t have to tell you why. It is obvious for all to see. Here are the recent facts.

Near the end of September, the US Mint was reporting 3,375,000 ounces of American Silver

Eagles and then suddenly on the last day the figure was revised to 4,140,000 ounces! What

happened? On a single day the US Mint sold a record 766,000 more Silver Eagles! According to

the US Mint this was unprecedented and September sales were double that of July and August:

To put this into perspective, 766,000 ounces of silver is more than all the Gold Eagles sold to date,

or actually double the 379,000 ounces of Gold Eagles in 2014! What caused this jump? It was

entirely caused by actual physical demand as a direct result of fraudulent paper suppression

of metals below the cost of production. The banksters are literally shooting themselves in the

foot and this is not strength, but weakness on their part. Hang tough and stay the course!

America’s Financial Reckoning Day and

German-Style Hyperinflation?

As most of you know, I have written the book on how things are going to end. Since 2008, the

Fed has embarked on a monetary expansion of credit like the world has never seen. All of this

loose fiscal and monetary policy is merely postponing a financial reckoning day and we are at

ground zero. The US is the largest debtor nation in the world with over $200 trillion in unfunded

liabilities! Talk about boom and bust! It is highly noteworthy that the Bank of England is not a

signatory of the European Central Bank Gold Agreement to limit gold sales, and I suspect that

both the BOE and the Fed are selling off gold to the East. Is it any wonder Germany requested

their gold back from the US Fed in 2013 and has been told to wait until 2020!? As featured in this

historical chart above, the German people are familiar with hyperinflation and the destruction

of their currency from 1918 to 1923. How soon before Americans suffer the same fate?

In conclusion, it is time to get prepared for what is to come (as our beloved JB Wells likes to say).

I sense that the global monetary system is heading for a very disorderly “reset” in which all

assets will be re-priced and we will see gold and silver reassert itself as real money and reward

those who protect their wealth while there is still time. The path we are on is unsustainable and

I recommend that you read my book or pass along to those you care about. I also recommend

pure gold and silver bullion and urge you to do so promptly – I can assist you or find a good

dealer near you. As mentioned earlier, our fiscal/monetary problems are structural and the Fed

is simply trapped – pushing on a string they say. The notion of a strong dollar is only a perception

and a subtle lie. I leave you with this final article about a breaking scandal at the NY Fed. This

pretty much sums it up. My own perception is that we need to join the Chinese and hedge

ourselves against the banksters in NY and London. A day of reckoning is coming my friends.

Until next time, Your Messenger in Pinetop www.idpconssultinggroup.com

Disgruntled Fed Lawyer Blows Whistle on

Regulatory Capture: Subtleties and

Perceptions at the Fed Keith Weiner Contributor 9/29/2014, www.forbes.com

In 2008, the monetary system plunged into acute crisis. The Federal Reserve, in charge of banking

regulation—not to mention the dollar itself—didn’t see it coming. So in 2009, the Fed hired David Beim

to learn why not. He blames regulatory capture. In his words, it’s like “… a watchdog who licks the face

of an intruder… instead of barking at him.” Beim recommends hiring the kind of people who won’t get

captured. The Fed hoped Carmen Segarra was the right kind of person, when it hired her in 2011 to

regulate Goldman Sachs. On the job, she quickly noticed that Fed employees seemed afraid of Goldman,

and thought this was backwards. She said, “The Fed has both the power to get the information and the

ability to punish the bank if it chooses to withhold it.” Increasingly disgruntled, Segarra secretly recorded

her meetings with not only Goldman but Fed colleagues as well. (She secretly recorded 46 hours of audio

from her meetings, during her short stint on site at Goldman as a Fed employee).

There is an ongoing narrative, which is simple, even facile. We had a crisis in 2008, and therefore

banks caused it. Because, greed. This is the backdrop for her story, and the story presented by This

American Life and ProPublica. It is how every article I have read about that story, except this one by David

Stockman, spins it. Banks suffocate under a full-time, on-site team of government minders. In Sagerra’s

words, “The Fed has both the power to get the information [i.e. whatever it demands] and the ability to

punish the bank if it chooses to withhold it. And some of these powers involve criminal action.” The banks

are monitored, controlled, regulated, and supervised. So how is it possible that they got away with crime

on such a scale as to nearly collapse the monetary system? I don’t want to reiterate my thoughts about

Segarra’s tapes and interview here. I cover that in my Forbes article. I want to look at the issue of

perception vs. reality. It’s a point that Segarra herself emphasizes in her interview with Jake Bernstein.

She related a conversation she had with Mike Silva, the chief Fed regulator in charge of Goldman, “…He

said, you know, credibility at the Fed is about subtleties and about perceptions, as opposed to reality.”

Segarra was outraged. She told Bernstein, “For somebody to tell me that credibility is about perception as

opposed to reality? I mean, I come from the world of legal and compliance, we deal with hard evidence.

It’s like, we don’t deal with, you know, ………perceptions.” End of excerpt.

“The Fed is about subtleties and about perceptions.”