Global Debt Over $200 Trillion, Gold Demand Surges

 by Today Egon von Greyerz 
 source : kingworldnews.com

 US deficits are set to continue to rise, no matter who wins the election. This means a great deal more money printing. Right now the US has $40 billion per month of QE in the form of buying mortgage-backed securities, and with ‘Twist’ another $45 billion. But you have to also add the $145 billion monthly budget deficit.”
“Right now the US deficit is running at roughly $1.5 trillion per year. So in total, the US is already printing $200 billion each month, and that will of course increase. The US debt is up $10 trillion in ten years. As revenues decline and expenditures increase, the pressures on the US economy will be enormous, and the deficit will increase substantially.
In a couple of years time, we will have $20 trillion, at least, of US debt....
“$20 trillion of US debt, think about that for a moment. US tax revenue is now around $2.3 trillion. If you examine $20 trillion of debt, and factor in a dramatic increase in interest rates in coming years, as money is printed and inflation enters the picture, an interest rate of 12% is very likely.
Take 12% of $20 trillion and you get $2.4 trillion per year just in interest. That figure is more than the current tax revenue of $2.3 trillion. So the US will reach a point, in the not too distant future, where the total debt servicing will be equal to the total tax revenue. That is of course unsustainable.
If you look at global debt, in the last ten years it is up from $80 trillion, to $200 trillion. These are figures which are hard to comprehend. Global debt has increased $120 trillion in just ten years. So when you look at the so-called prosperity of the world, it is all based on debt. So it is all an illusion.
Central bank balance sheets are also exploding. They have increased 16%, compounded, per annum. What are the central banks doing? Just like the Fed, they are buying toxic debt which has zero value. What are they doing to buy that? They are printing worthless pieces of paper, they call it ‘money,’ and with that ‘money’ they are buying another worthless piece of paper which they call an ‘asset.’
So it is the most massive Ponzi scheme the world has ever seen, and this will clearly end in total disaster. It will end with the implosion of debt and the implosion of assets. But before that, we will have hyperinflation. As governments continue to print, we will have hyperinflation.
Hyperinflation comes from a collapsing currency. Take Iran, that is a good example. Iran’s currency is now down 70%, and inflation is now estimated to be running at 50% per month. This is what we will see all over the Western world in coming years. I’m absolutely certain about that.”
Greyerz had this to say regarding gold: “So we are holding gold to preserve wealth because gold is the ultimate way of protecting your assets from total destruction as a result of the money printing. Because the financial system is bankrupt and governments are bankrupt, any asset that you hold within that system is at risk.
This is why you have to have physical gold and you must store it outside of the banking system. Eric Sprott came out with a superb report detailing the official figures we are seeing regarding production and purchases of gold. His conclusion, quite correctly, was that they are not telling the truth in those official reports being published.
He (Sprott) is looking at an annual deficit of 2,500 to 2,600 tons of gold. I have talked about this many times, and Eric puts it superbly in his report, that the 30,000 tons which central banks are holding in gold reserves, with the Western central banks holding about 23,000 tons of that gold, are probably not there.
When that becomes apparent, there will be panic in the gold market because nobody will hold paper gold anymore. It means that Western governments do not have adequate amounts of gold to back their money.”
Greyerz also added: “I would also note, Eric, that some of the refiners we are talking to, they are seeing business strongly increasing now, and in this environment they are actually increasing their margins and prices. So there is clearly an increase in short-term demand. This is why, up to now, the paper shorts in the gold market have been struggling to bring the price down.”

The Destruction Of Currency And Rise Of Gold

  
by Nick Barisheff 
source : goldsilverworlds.com

Today’s discussion is based on the primary trend that started at the beginning of this millennium. The fundamental shift that has been taking place since then was the creation of value through paper assets shifting in a gradual way to hard assets, primarily (but not only) gold and silver. Part of the current ongoing dollar devaluation is caused by this disparity between financial assets and gold. Nick Barisheff gave with these rounded numbers to create a high level picture of the scale of the paper asset market versus gold. The market for financial assets should be worth approximately $250 trillion. It includes mortgage bonds, equities, treasury bills and related financial instruments. It contains pure paper assets and does not include real estate or derivatives. Against that $250 trillion stands a nominal value of the gold market of around $4 trillion.

Fraud, Why The Great Recession Happened

"Fraud. Why The Great Recession Happened" is a crowdfunded documentary.

The Great Recession has not been fault of the free market. On the contrary, it´s origin should be sought for in the State´s and central bank´s deep intervention in the economy, causing in a fraudulent way, recurrent cycles of artificial expansion, the" bubble effect" and economic recession that all citizens end up paying for.The great depression is what happens when the government sticks their hands in everyone's business. How come we still haven't learned? America was created to have less government control. and it worked amazingly. Then Roosevelt stuck his hands into everything and we spent twelve years with 25% unemployment. But we continue to try it that way.So many people are dependent on the government giving them money. What is going to happen when they run out of other peoples money to give?

Finally, the root of the Great Recession is found at the end of WW2 when were created World Bank, and first and foremost IMF. Illuminati, the majority of them being bankers, have planned since more than two hundred years ago these events (1773), and mainly IMF, next with the Hebrew Banks, had and have a vital role in today's global depression and into the enslavement of the populations of the world in these huge debts. Their final goal is a new economic, social, politic, cultural order obtained through a war: WW3 or "The Final Social Cataclism".

source : www.amagifilms.com

Have you seen Robert Triffin?

 By Joe Yasinski and Dan Flynn 

source : bullioninternational

"It was the outcome of an unbelievable collective mistake, which, when people become aware of it, will be viewed by history as an object of astonishment and scandal"  - Jaques Reuff 1972 .

The obscure Belgian economist Robert Triffin is not only very dead he also isn't exactly a household name, yet. Triffin, who died in 1993 studied at Harvard, taught at Yale, worked at the Federal Reserve, the IMF, and was a key contributor to the formation of the European monetary system. Triffin exposed serious flaws in the Bretton Woods monetary system and perfectly predicted it's inevitable demise yet his work remains largely ignored and unstudied by today's mainstream economists. This "flaw" became known as the Triffin dilemma, and many believe Triffin's dilemma has as serious implications today as it did 50 years ago. In short, Triffin proposed that when one nations currency also becomes the worlds reserve asset, eventually domestic and international monetary objectives diverge. Have you ever wondered how it's possible that the USA has run a trade deficit for 37 consecutive years? Have you ever considered the consequences on the value of your Dollar denominated assets if it eventually becomes an unacceptable form of payment to our trading partners? Thankfully for those of us trying to navigate the current financial morass, Robert Triffin did. Prior to the 1944 Bretton Woods agreement, central banks used gold as the asset to back their currencies. By the end of World War II, the United States had established itself as the world's creditor and largest holders of gold. Under the 1944 Bretton Woods agreement, the US Dollar was fully backed by gold at a fixed value of 1/35th an ounce per dollar, and foreign Central Banks could use US Dollar assets as reserves backing their currency, in lieu of gold. This agreement avoided the inevitable deflationary pressure a return to pre-war gold/currency ratios would have forced just as Europe was beginning to rebuild, and allowed US debt held abroad to be used as an asset by central banks against their local currencies.

The three Big Central Banks, the Japanese, the European and the Americans are all in the game and printing

Jim Rogers : "The central bank in Europe is getting in the party — everybody is in the party. The Chinese are not quite so much in the party as they were before but the three big central banks, the Japanese, the European and the Americans are all in the game and printing."
"Either the world economy is going to get better and commodities are going to go up because of shortages, or they are going to print more money, and throughout history when they printed a lot of money, you protect yourself by owning real assets."

- in NewsMax TV

Click Here to watch the full interview>>>>>

Jim Rogers started trading the stock market with $600 in 1968.In 1973 he formed the Quantum Fund with the legendary investor George Soros before retiring, a multi millionaire at the age of 37. Rogers and Soros helped steer the fund to a miraculous 4,200% return over the 10 year span of the fund while the S&P 500 returned just 47%.

To Tax Is to Destroy

The landmark Supreme Court decision McCulloch v. Maryland (1819) has had wide impact on the powers of the federal government. In fact, this decision, more than any other, is responsible for the incredible growth of federal authority throughout the years. Today, Washington has a tight grip on every aspect of our lives, and much of this federal intrusion is due to the "implied powers" doctrine that emanated from this court decision.

In the case, the clerk of the Bank of the United States, James McCulloch, brought action against the state of Maryland. In opposition to the national bank, Maryland had imposed a tax on the Bank of the United States — hoping to tax it out of existence. McCulloch took the position that such a tax was an unconstitutional interference with the activities of the federal government by a state — in this case Maryland. Therefore, McCulloch brought action to stop Maryland from taxing the national bank out of existence.

Pleading the case on behalf of McCulloch, the eminent jurist Daniel Webster argued that Maryland had no authority to tax the bank. The essence of his argument was quite simple: "An unlimited power to tax involves, necessarily, a power to destroy."

The court agreed. Speaking for a unanimous court, Chief Justice John Marshall echoed Webster's words. He wrote, "The power to tax implies the power to destroy. If the States may tax one instrument, may they not tax every other instrument…? This was not intended by the American people."

Consequently, with the help of these two highly esteemed jurists, we have conclusively settled a point of contention among many scholars — that the unlimited power to tax is the power to destroy, clear and simple. And without question, the government has an unlimited power in this respect.

Let us now examine some of the many ways in which the power to tax destroys.

The Fed and the ECB: Two Paths, One Goal

by Philipp Bagus

 Both the Federal Reserve (Fed) and the European Central Bank (ECB) are owners of the printing press. They produce base money. On top of the base-money production, the fractional-reserve-banking system can produce money out of thin air. Both central banks produce money in order to finance their respective governments. As a result of their money production, prices will be higher than they would have been otherwise. All money users indirectly pay for the government deficits through a reduction in purchasing power and the reduced quality of their money.
While the ECB's and Fed's functions (to provide liquidity to the banking system in times of crisis and to finance the government together with the banking system) are the same, there exist small differences between them. In the so-called open-market operations (another term for active manipulation of the money supply) the central banks produce or destroy base money.
There are two ways central banks produce base money. By tradition, the Fed uses the produce-money-and-purchase approach (PMP). Normally, the Fed produces money in their computers and uses it to buy US Treasuries from the banking system. In exchange for the US Treasuries, the Fed creates money on the account that the selling bank holds at the Fed.
The ECB, in contrast, uses the produce-money-and-lend (PML) approach. It produces money and lends it to the banking system for one week or three months. The preferred collateral for these loans to banks is government bonds.[1] As a result of PMP and PML, banks receive new base money. They hold more reserves at their account at the central bank. The additional reserves mean that they can now expand credit and create even more money.
For governments, the mechanism works out pretty well. They usually spend more than they receive in taxes, i.e., they run a deficit. No one likes taxes. Yet, most voters like to receive gifts from their governments. The solution for politicians is simple. They promise gifts to voters and finance them by deficits rather than with taxes. To pay for the deficit, governments issue paper tickets called government bonds such as US Treasuries.
An huge portion of the Treasuries are bought by the banking system, not only because the US government is conceived as a solvent debtor, thanks to its capacity to use violence to appropriate resources, but also because the Fed buys Treasuries in its open-market operations. The Fed, thereby, monetizes the deficit in a way that does not hurt politicians.
But what about the interest paid on the Treasuries? The US government has to pay interest on the bonds to their new owner, the Fed. The Fed receives the interest, which increases the Fed's profit. Who receives the Fed's profit? The bulk of the Fed's profit is remitted back to the US government at the end of the year.
But what about the principal on the bonds? What happens when the bond must be paid back? At the end of the term of the bonds, the government would have to pay its holders. The trick here is just to issue a new bond to pay for the maturing one. Thus, the debts must never be paid but keep getting monetized. Figure 1 shows how the Fed finances the US deficit:

Figure 1: How the Fed finances the US government

The ECB finances deficits in a more subtle way. Only in the sovereign-debt crisis did it start to buy government bonds outright. Normally, the ECB lends to banks against collateral. Banks buy government bonds because they know it is preferred collateral at the ECB. By pledging the bonds as collateral at the ECB, banks receive new reserves and can expand credit. As the government bonds are still owned by banks, governments have to pay interest to banks. Banks, in turn, pay interest on the loans they receive from the ECB, which remits its profits back to governments.
Thus, the system is similar to the Fed, with the difference that normally some of the interest payments leak out to the banking system that pays lower interest rates on its loans than it receives on the bonds. Another important difference is that there may be a redistribution between governments if eurozone governments run deficits of different sizes. In my book The Tragedy of the Euro I explain that the Eurosystem resembles a tragedy of the commons. Several independent governments can use one central-banking system to finance their deficits and externalize the costs in the form of a loss of purchasing power of the Euro onto all users of the currency. The incentive is to have higher deficits than other eurozone governments in order to profit from the monetary redistribution. The flow of the new money is shown in figure 2.

Figure 2: How the ECB finances Euro area governments

Is the difference between the Fed's and the ECB's manipulation of the money supply essential? The Fed buys government bonds outright, while the ECB accepts them as collateral for new loans to the banking system. Economically, the effects are identical. The money supply increases when the Fed buys government bonds. When the ECB grants a loan with government bonds pledged as collateral, the money supply increases as well. In the case of the Fed, the money supply increases until the Fed sells the bond. In the case of the ECB, the money supply increases until the ECB fails to roll over (renew) its loan to the banking system.
There exists a legal difference. The Fed integrates the government bonds on its balance sheet. The ECB does not do so as bonds remain legally the ownership of the banks. Because the ECB does not publish the collateral provided for its loans, we do not know how many Greek government bonds, for example, are provided as collateral for ECB loans. The Fed is more transparent in this respect.
In both cases, government deficits are effectively monetized. That means that the ECB was bailing out Greece even before May 2010. It did not have to buy the Greek bonds outright; it only had to accept them as collateral. If the ECB had not accepted Greek bonds, Greek debts could not have mounted to such an extent. The Greek government would have had to default much earlier.
Aside from this more direct monetization, there is also a monetization going on that is often neglected. Market participants know that central banks buy government bonds and accept them as the preferred collateral. Banks buy the bonds due to their privileged treatment ensuring a liquid market and pushing down yields.
Knowing that there is a very liquid market in government bonds and a high demand by banks, investment funds, pension funds, insurers, and private investors buy government bonds. Government bonds become very liquid and almost as good as base money. In many cases, they serve to create additional base money. In other cases they stand as a reserve to be converted into base money if necessary. As a consequence, new money created through credit expansion often ends up buying liquid government bonds, indirectly monetizing the debt. (Another main holder of government debts is other foreign central banks.)
Imagine that the government has a deficit and issues government bonds. Part is bought by the banking system and used to get additional reserves from the central bank, which buys the bonds or grants new loans, accepting them as collateral. The banking system uses the new reserves to expand credit and grant loans to, for example, the construction industry. With the new loans, the construction industry buys factors of production and pays its workers. The workers use part of the new money to invest in funds. The investment funds then use the new money to acquire government bonds. Thus, there is an indirect monetization. Part of the money created by the fractional-reserve-banking system ends up buying government bonds because of their preferential treatment by the central bank, i.e., its direct monetization.
The process is shown in figure 3:

While it is an intricate system at the first sight, one that many common citizens fail to understand, the system boils down to the following: The government spends more than it receives in taxes. The difference is financed by its friends from the financial system, accommodated by central banks. Money production sponsors politicians' dreams, thereby destroying our currencies. The population pays in the form of a lower purchasing power of money.
For governments it is the perfect scheme. The costs of their deficits are externalized to the users of the currency. The debt is never paid through unpopular taxes but simply by issuing paper that says, "government bond."

Notes

[1]  Traditionally central banks have used both ways to finance government debt. America's Federal Reserve System places emphasis on the purchase of government bonds in its open-market operations. It also accepts government bonds as collateral in repurchase agreements. Repurchase agreements and other loans in which government bonds were accepted as collateral rose in importance during the financial crisis of 2008. The European Central Bank, on the contrary, has put more emphasis on accepting government bonds in collateralized loans in its lending operations to the banking system. Only during the sovereign-debt crisis of 2010 did the ECB started buying government bonds outright. On these central-bank policies in the wake of the financial crisis, see Bagus and Howden (2009) and Bagus and Schiml (2010).

The Fed Plays All Its Cards

by Peter Schiff - Europac

There never really could be much doubt that the current experiment in competitive global currency debasement would end in anything less than a total war. There was always a chance that one or more of the principal players would snap out of it, change course and save their citizenry from a never ending cycle of devaluation. But developments since September 13, when the U.S. Federal Reserve finally laid all its cards on the table and went "all in" on permanent quantitative easing, indicate that the brainwashing is widely established and will be difficult to break. The vast majority of the world's leading central bankers seem content to walk in lock step down the path of money creation as a means to economic salvation. Never mind that the path will prevent real growth and may ultimately lead off a cliff. The herd is moving. And if it can't be turned, the only thing that one can do is attempt to get out of its way.

The details of the Fed's new plan (which I christened Operation Screw in last week's commentary) are not nearly as important as the philosophy it reveals. The Federal Reserve has already unleashed two huge waves of quantitative easing (purchases of either government securities or mortgage-backed securities) in order to stimulate consumer spending and ignite business activity. But the economy has not responded as hoped. GDP growth has languished below trend, the unemployment rate has stayed north of 8%, and the labor participation rate has fallen to all-time lows. In the meantime, America's fiscal position has grown significantly worse with government debt climbing to unimaginable territory. Despite the lack of results, the conclusion at the Federal Reserve is that the programs were too small and too incremental to be effective. They have determined that something larger, and potentially permanent, would be more likely to do the trick.

However, in making its new plan public, the Fed made a startling admission. At his press conference, Ben Bernanke backed away from previous assertions that printed money would be effective in directly pushing up business activity. Instead he explained how the new stimulus would be focused directly at the housing market through purchases of mortgage backed securities. He made clear that this strategy is intended to spark a surge in home prices that will in turn pull up the broader economy. Such a belief requires a dangerous amnesia to the events of the last decade. Despite x²the calamity that followed the bursting of our last housing bubble, economists feel this to be a wise strategy, proving that a poor memory is a prerequisite for the profession.

But now that the Fed is thus committed, the focus has shifted to foreign capitals. Not surprisingly, the dollar came under immediate pressure as soon as the plan was announced. In the 24 hours following the announcement, the Greenback was down 2.2% against the euro, 1.6% against the Australian Dollar, and 1.1% against the Canadian Dollar. A week after the Fed's move, the Mexican Peso had appreciated 2.7% against the US dollar. Many currency watchers noted that more dollar declines would be likely if foreign central banks failed to match the Fed in their commitments to print money. On cue, the foreign bankers responded.

It is seen as gospel in our current "through the looking glass" economic world that a weak currency is something to be desired and a strong currency is something to be disdained. Weak currencies are supposed to offer advantages to exporters and are seen as an easy way to boost GDP. In reality, weak currencies simply create the illusion of growth while eroding real purchasing power. Strong currencies confer greater wealth and potency to an economy. But in today's world,no central banker is prepared to stand idly by while their currency appreciates. As a result, foreign central banks are rolling out their own heavy artillery to combat the Fed.

Perhaps anticipating the Fed's actions, on September 6th the European Central Bank announced its own plan of unlimited buying of debt of troubled EU nations (however, the plan did come with important concessions to the German point of view - see John Browne's commentary). On September 17th, the Brazilian central bank auctioned $2.17 billion of reverse swap contracts to help push down the Brazilian Real. The next day, Peru and Turkey cut rates more than expected. On September 19th, the Bank of Japan increased its asset purchase program from 70 trillion yen to 80 trillion and extended the program by six months. It's clear we are seeing a central banking domino effect that is not likely to end in the foreseeable future.

Although the Fed is directing its fire towards the housing market, the needle they are actually hoping to move is not home prices, but the unemployment rate. Until that rate falls to the desired levels (some at the Fed have suggested 5.5%), then we can be fairly certain that these injections will continue. This will place permanent pressure on banks around the world to follow suit.

All of this simultaneous money creation will likely be a boon for nominal stock and real estate prices. But in real terms such gains will likely not keep pace with dollar depreciation. Inflation pushes up prices for just about everything, so stocks and real estate are not likely to prove to be exceptions. Even bond prices can rise in the short term, but their real values are the most vulnerable to decline. In fact, even nominal bond prices will ultimately fall, as inflation eventually sends interest rates climbing. But prices for hard assets, precious metals, commodities, and even those few remaining relatively hard currencies should be on the leading edge of the upward trend in prices.

While I believe the Fed's plan will be a disaster for the economy, the silver lining is that it provides investors with a road map. As the policy of the Fed is to debase the currency, those holding dollar based assets may seek alternatives in hard assets and in the currencies of the few remaining countries whose bankers have not drunken so freely from the Keynesian Kool-Aid. We believe that such opportunities do exist. Some broad ideas are outlined in the latest edition of my Global Investor Newsletter, which became available for download this week. I encourage those looking for ways to distance their wealth from the policies of Ben Bernanke to start their search today.

Peter Schiff is CEO of Euro Pacific Precious Metals, a gold and silver dealer selling reputable, well-known bullion coins and bars at competitive prices.

Hyperinflation Watch - Cyclical or Structural?

by James Turk - Goldmoney

The US federal government spent $369 billion in August, but only received $179 billion in revenue. The resulting $190 billion deficit was a record for any August and the third highest monthly deficit in the current fiscal year, which ends on September 30th.

Looking at this deficit another way, the federal government borrowed 51.6% of the dollars it spent in August. Consequently, the growth of the national debt continues to accelerate, as illustrated by the green bars in the following chart.

This chart also illustrates that the deficit – the gap between expenditures (red line) and revenue (blue line) – is not narrowing to any significant extent, which is a critically important observation. A persistent gap that is barely shrinking has never happened before.

Normally economic activity revives after a recession, which in turn leads to increased revenue for the federal government, like it did from 2004-2008 when the more rapid growth in revenue almost eliminated the deficit. But not this time. Revenue is increasing, but so are expenditures at almost the same rate.

Consequently, the deficit is not shrinking, which confirms a point I have made repeatedly for two years. The US is confronting a structural problem. It is not a cyclical one that will go away with improved economic activity. Importantly, the failure to address this problem will eventually lead to hyperinflation and the destruction of the dollar.

Mr. Bernanke sees it differently. Here is what he said in his well-publicized Jackson Hole speech on August 31st.

“In light of the policy actions the FOMC has taken to date, as well as the economy's natural recovery mechanisms, we might have hoped for greater progress by now in returning to maximum employment. Some have taken the lack of progress as evidence that the financial crisis caused structural damage to the economy, rendering the current levels of unemployment impervious to additional monetary accommodation. The literature on this issue is extensive, and I cannot fully review it today. However, following every previous U.S. recession since World War II, the unemployment rate has returned close to its pre-recession level, and, although the recent recession was unusually deep, I see little evidence of substantial structural change in recent years.” [emphasis added]

Note how Mr. Bernanke relies on precedent to defend his point of view. He believes that economic activity will grow just like it has after “every previous U.S. recession since World War II” because unemployment will fall as it always has, even though unemployment remains stubbornly high. Not only does he thereby imply that so-called black-swans – which are rare events – exist, he clearly refuses to believe that we may already be in one. To see the “evidence of substantial structural change” he says is missing, all Mr. Bernanke needs to do is look at the deficit gap so clearly illustrated in the above chart.

It is not the first time Mr. Bernanke has relied on ‘what is supposed to happen’ instead of what is actually happening. The following is from a CNBC interview on July 1, 2005.

“INTERVIEWER: Tell me, what is the worst-case scenario? We have so many economists coming on our air saying ‘Oh, this is a bubble, and it’s going to burst, and this is going to be a real issue for the economy.’ Some say it could even cause a recession at some point. What is the worst-case scenario if in fact we were to see prices come down substantially across the country?

BERNANKE: Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.” [emphasis added]

Just a few months before, Doubleday published The Collapse of the Dollar and How to Profit From It, the book I co-authored with John Rubino. Here is what we said on page 164 after providing our analysis of the housing market: “To put it bluntly, by virtually every measure, today’s housing market is a classic financial bubble.” The housing bubble was apparent not only to John and me, but also the dozens of others who understand the fundamental economic principles of the Austrian School. Apparently, that does not include Mr. Bernanke.

In conclusion, don’t put your faith on the pronouncements of any central planner. Rely instead on your own common sense, which hopefully has been well grounded by insights from parents or grandparents who lived through the collapse of the German Reichsmark, Serbian dinar, Argentine austral or any of dozens of other currency collapses. If you did not have that opportunity to learn from relatives who experienced a currency collapse firsthand, then I recommend that you read Mises, Rothbard and the other Austrian School scholars published at Mises.org.

Once you do, then decide for yourself whether the problem facing the US is cyclical or structural. Common sense and experience are telling me that it is structural.

Sadly, policymakers are doing little if anything about it. So we need to prepare for the consequences. The best way to do that of course is to own physical gold and silver.

Originally published at http://www.fgmr.com/cyclical-or-structural.html

Race To Debase - 2012 Q3 - Fiat Currencies vs Gold & Silver

GoldSilver.com

Welcome back to the Worldwide Fiat Currency Race to Debase!

Gold has recently touched new all time highs in terms of euros, Swiss francs, and Brazilian real.
Below you will find a report on 75 different fiat currencies vs gold and silver from around the globe.  
Note how they have ALL lost value to gold and silver thus far in 2012.  
With recent announcements of even further central bank monetary easing policies (QE3, Japan, Brazil, etc.) we fully expect the current gold bull market and silver bull market revaluation trend to not only continue, but to quicken moving forward. 
Be sure to also click here and see how fiat currencies have performed against gold and silver over the last 12+ years.
   

Base Currency vs 1 Gold Ounce	1-Jan-12	30-Sep-12	% Gold +/- 2012 Q3
Afghanistan Afghanis	75,531	89,681	18.7%
Albania Leke	168,101	192,130	14.3%
Algeria Dinars	117,439	140,418	19.6%
Argentina Pesos	6,725	8,324	23.8%
Australia Dollars	1,531	1,708	11.6%
Bahamas Dollars	1,563	1,773	13.5%
Bahrain Dinars	589	669	13.5%
Bangladesh Taka	127,834	144,798	13.3%
Barbados Dollars	3,126	3,547	13.5%
Bermuda Dollars	1,563	1,773	13.5%
Brazil Reais	2,911	3,592	23.4%
Bulgaria Leva	2,362	2,691	13.9%
CFA BEAC Francs	791,233	904,853	14.4%
Canada Dollars	1,597	1,744	9.2%
Chile Pesos	811,978	840,821	3.6%
China Yuan Renminbi	9,839	11,147	13.3%
Colombia Pesos	3,029,385	3,192,957	5.4%
CFP Franc	143,941	164,611	14.4%
Base Currency vs 1 Gold Ounce	1-Jan-12	30-Sep-12	% Gold +/- 2012 Q3
Costa Rica Colones	788,922	873,382	10.7%
Croatia Kuna	9,094	10,259	12.8%
Czech Republic Koruna	30,882	34,666	12.3%
Denmark Kroner	8,960	10,284	14.8%
Dominican Republic Pesos	60,181	69,694	15.8%
East Caribbean Dollars	4,221	4,788	13.5%
Egypt Pounds	9,424	10,813	14.7%
Euro	1,206	1,379	14.4%
Fiji Dollars	2,846	3,141	10.4%
Hong Kong Dollars	12,143	13,751	13.2%
Hungary Forint	379,759	393,615	3.6%
IMF Special Drawing Rights	1,018	1,153	13.2%
Iceland Kronur	191,361	219,299	14.6%
India Rupees	82,941	93,721	13.0%
Indonesia Rupiahs	14,177,770	16,962,571	19.6%
Iran Rials	17,390,044	21,751,503	25.1%
Iraq Dinars	1,828,104	2,066,011	13.0%
Israel New Shekels	5,970	6,951	16.4%
Jamaica Dollars	133,727	158,395	18.4%
Base Currency vs 1 Gold Ounce	1-Jan-12	30-Sep-12	% Gold +/- 2012 Q3
Japan Yen	120,542	138,299	14.7%
Jordan Dinars	1,109	1,252	12.9%
Kenya Shillings	132,790	151,182	13.9%
Kuwait Dinars	435	498	14.4%
Lebanon Pounds	2,350,978	2,663,647	13.3%
Malaysia Ringgits	4,954	5,425	9.5%
Mauritius Rupees	45,175	54,159	19.9%
Mexico Pesos	21,802	22,813	4.6%
Morocco Dirhams	13,404	15,254	13.8%
New Zealand Dollars	2,010	2,137	6.3%
Norway Kroner	9,345	10,156	8.7%
Oman Rials	602	681	13.2%
Pakistan Rupees	140,605	168,273	19.7%
Peru Nuevos Soles	4,215	4,607	9.3%
Philippines Pesos	68,466	74,039	8.1%
Poland Zloty	5,374	5,681	5.7%
Qatar Riyals	5,692	6,457	13.4%
Romania New Lei	5,210	6,264	20.2%
Russia Rubles	50,021	55,332	10.6%
Base Currency vs 1 Gold Ounce	1-Jan-12	30-Sep-12	% Gold +/- 2012 Q3
Saudi Arabia Riyals	5,862	6,648	13.4%
Singapore Dollars	2,027	2,177	7.4%
South Africa Rand	12,630	14,739	16.7%
South Korea Won	1,810,284	1,970,780	8.9%
Sri Lanka Rupees	180,278	229,522	27.3%
Sudan Pounds	4,176	7,826	87.4%
Sweden Kronor	10,794	11,644	7.9%
Switzerland Francs	1,467	1,666	13.6%
Taiwan New Dollars	47,324	51,938	9.7%
Thailand Baht	49,310	54,674	10.9%
Trinidad and Tobago Dollars	9,926	11,390	14.8%
Tunisia Dinars	2,339	2,790	19.3%
Turkey Lira	2,957	3,187	7.8%
United Arab Emirates Dirhams	5,742	6,514	13.4%
United Kingdom Pounds	1,007	1,097	9.0%
United States Dollars	1,563	1,773	13.5%
Venezuela Bolivares Fuertes	6,722	7,626	13.5%
Vietnam Dong	32,873,044	36,999,792	12.6%
Zambia Kwacha	7,995,512	8,918,429	11.5%

Gold is Good Money - Dr. Ron Paul, U.S. Congressman

goldseek.com

Last year the Chairman of the Federal Reserve told me that gold is not money, a position which central banks, governments, and mainstream economists have claimed is the consensus for decades. But lately there have been some high-profile defections from that consensus. As Forbes recently reported, the president of the Bundesbank (Germany's central bank) and two highly-respected analysts at Deutsche Bank have praised gold as good money.

Why is gold good money? Because it possesses all the monetary properties that the market demands: it is divisible, portable, recognizable and, most importantly, scarce - making it a stable store of value. It is all things the market needs good money to be and has been recognized as such throughout history. Gold rose to nearly $1800 an ounce after the Fed's most recent round of quantitative easing because the people know that gold is money when fiat money fails.

Central bankers recognize this too, even if they officially deny it. Some analysts have speculated that the International Monetary Fund's real clout is due to its large holdings of gold. And central banks around the world have increased their gold holdings over the last year, especially in emerging market economies trying to protect themselves from the collapse of Western fiat currencies.

Fiat money is not good money because it can be issued without limit and therefore cannot act as a stable store of value. A fiat monetary system gives complete discretion to those who run the printing press, allowing governments to spend money without having to suffer the political consequences of raising taxes. Fiat money benefits those who create it and receive it first, enriching government and its cronies. And the negative effects of fiat money are disguised so that people do not realize that money the Fed creates today is the reason for the busts, rising prices and unemployment, and diminished standard of living tomorrow.

This is why it is so important to allow people the freedom to choose stable money. Earlier this Congress I introduced the Free Competition in Currency Act (H.R. 1098) to permit people to use gold as money again. By eliminating taxes on gold and other precious metals and repealing legal tender laws, people are given the option between using good money or fiat money. If the government persists in debasing the dollar – as money monopolists have always done – then the people would be able to protect themselves by using alternatives such as gold that are both sound and stable.

As the fiat money pyramid crumbles, gold retains its luster. Rather than being the barbarous relic Keynesians have tried to lead us to believe it is, gold is, as the Bundesbank president put it, "a timeless classic." The defamation of gold wrought by central banks and governments is because gold exposes the devaluation of fiat currencies and the flawed policies of government. Governments hate gold because the people cannot be fooled by it.

THE BUBBLE - A chronological re-ordering of the events and arguments of the bubble

thebubblefilm.com

Who Caused it. Who Called it. What’s Next.

Coming in Fall 2012, The Bubble asks the experts who predicted the current recession, “What happened and why?” Diving deep into the true causes of the financial crisis, renowned economists, investors and business leaders explain what America is facing if we don't learn from our past mistakes. The film poses the question: “Is the economy really improving or are we just blowing up another Bubble?”

A chronological re-ordering of the events and arguments of THE BUBBLE

PART 1: THE CAUSES

The Federal Reserve and Interest Rates


Low interest rates from the Federal Reserve enticed people to borrow savings that did not exist. Both the government and the artificially lowered interest rate diverted resources into housing, creating a bubble that would inevitably burst.
· Increased home prices encouraged home owners to borrow money based on their real estate price and accumulate more debt.
· When the market responded by forcing interest rates back up, these bubble projects failed. People realized they could not afford this lifestyle.


Government Guarantees

· Fannie Mae and Freddie Mac were Government Sponsored Enterprises that subsidize and guarantee home mortgages. Their liabilities were implicitly guaranteed by the government, who nationalized them in September of 2008.

· Banks frequently underwrote bad mortgages and sold them on secondary markets created by Fannie Mae and Freddie Mac.

· Commercial bank deposits are guaranteed by the FDIC, a highly leveraged government program that allows banks to take more risks.

· The Greenspan Put was the widespread belief in the market that Alan Greenspan would intervene to bail out the financial sector whenever threatened. This was based on his reaction to the Savings & Loan Crisis, the bailout of the Mexican Peso in the 90’s, the bailout of LTCM, the liquidity approaching Y2k, and his actions forcing the interest rate down to 1% for a full year after September 11th. This was later replaced with the even larger Bernanke Put.

Government Home Ownership Policies

· The mortgage income tax deduction artificially stimulated the real estate market and led to larger home purchases.

· The Basel regulations allowed banks to be more leveraged if they held mortgage loans and even more leveraged if they held mortgage backed securities.

· Presidents Clinton, Bush, and Obama have all attempted to decrease the down payment needed to buy homes.

Nontraditional Mortgages

· Includes both subprime loans (low credit score) and alt-a loans. (low down payment, adjustable rate, no doc)

· By 2008, half of all mortgages were nontraditional mortgages.

· Fannie Mae and Freddie Mac owned more nontraditional mortgages than the entire private sector.



Affordable Housing

· The Department of Housing & urban Development required Fannie and Freddie to allocate 50% of mortgages to individuals that were at or below the median income in their communities.

· The Community Reinvestment Act required mortgage lenders to fulfill a quota for low and moderate income home buyers in certain communities. Although it was expanded in the 1990’s, the role in the housing bubble was minor.

PART 2: PAST CRISES

Panic of 1920

· The Depression of 1920 was worse than the first year of the Great Depression. Production fell 21%, GDP dropped 24% and unemployment went from 4% to 11.7%.

· The Federal Government cut spending in half from 1920 to 1922 and did not enact a stimulus policy.

· The Depression ended in the summer of 1921 and unemployment dropped to 6.7% in 1922 and 2.4% in 1923.

The Great Depression

· Nominal GDP was down 46% during the Great Depression.

· Both Herbert Hoover and Franklin Delano Roosevelt increased government spending while implementing wage and price controls, along with tariffs.

· The Great Depression lasted a decade and the economy did not recover until World War II was over.

Inflation In The 1970s

· America rapidly increased the money supply and abandoned the gold standard in 1971.

· The economy suffered a downturn and prices increased dramatically. The cost of oil alone went from $3 to $30 a barrel.

· To fight inflation, Federal Reserve chairman Paul Volcker allowed interest rates to rise, by slowing down money creation. This lowered price inflation from 13.5% at its peak to 3.2% in 1983.

· The high unemployment and high inflation of the 1970s was predicted by the Austrians, while the Keynesian school of economics believed that combination to be impossible.

PART 3: Response To The Current Crisis

Interest Rate Cuts

· The Federal Reserve has consistently lowered interest rates throughout the crisis.

· They have now pushed interest rates down to zero.


Bailouts

· Bear Stearns creditors were bailed out on March 14th, 2008, despite their investment bank being leveraged 35.5:1.

· Fannie Mae and Freddie Mac were taken over by the government in September of 2008. This confirmed that their debt was guaranteed by the government. Treasury Secretary Paulson claimed in July 2008 that the companies were adequately capitalized despite only having $83 billion for $5 trillion in obligations.

· Although Lehman Brothers was allowed to fail, the rest of the financial sector was bailed out by the Federal Reserve, the Treasury department, and Congress.

· When Congress did not bail out the auto companies, President Bush did.

Stimulus Spending

· In February of 2008, following uncertainty in the Subprime mortgage market, George W. Bush signed a stimulus bill for over $152 billion dollars, attempting to get people to spend again.

· To support the housing market, George W. Bush signed the economic recovery act of 2008 which added $800 billion to the national debt.

· Following the bankruptcy of Washington Mutual and the bailout of AIG, George W. Bush signed the Trouble Asset Recovery Program which authorized the Treasury to buy up to $700 billion in bad assets.

· Due to the slow moving economy, newly elected President Obama continued George W. Bush’s spending spree by signing a $862 billion dollar stimulus bill.

PART 4: What America is Facing

Education Bubble

· Student loan debt’s version of Fannie Mae is called Sallie Mae.

· Student loans have spiked over a trillion dollars, more than all the car loans in the country combined.

· Graduates are finding they cannot pay back their loans with or without a job.

Coming Price Inflation

· Prices will dramatically rise due to the money created in response to the housing crash.

· Increased prices will lower the standard of living in the country.

· The devalued dollar resulting from inflation will wipe out savings for millions of Americans, particularly in the lower and middle classes.


National Debt Bubble

· The national debt approaching $16 trillion dollars is not sustainable.

· Foreign countries will stop buying Treasury bonds and interest rates will rise.

· Rising interest rates and deficits as far as the eye can see will lead to interest payments consuming the entire budget.

· America will be forced to cut spending.

Unfunded Liabilities Bubble

· The unfunded liabilities from Social Security and Medicare are as high as $119 Trillion Dollars.

· With the already high national debt, the federal government cannot absorb these added costs.

· Both Social Security and Medicare will be forced into bankruptcy. Defense will have to be cut.

Big Changes Are Coming, But The World Will Not End

by Robert Fitzwilson

source : KingWorldNews.com

40 year veteran, Robert Fitzwilson, wrote the following piece exclusively for King World News. Fitzwilson, who is founder of The Portola Group, warned, “Changes are coming, but it doesn’t mean the world will come to an end. But financial regime changes do result in a massive transfer of wealth from those who own paper assets, to those that own real assets.”
“Reflecting upon the news and the current state of affairs, it is striking how events are playing out according to script, as history and strategists have predicted. In the beginning of our journey, it was focused on discovery, historical context and understanding as to what had changed about markets, governments and people. The answer is almost everything if one looks just at our lifetimes.
On the other hand, nothing has really changed if one takes a longer view. One of our favorite sayings is, “The only thing new is the history you have not read”....
“We can vouch for that. After a review of much of the last 2,600 years, we have concluded that we are not the historic anomaly that we surmised at the beginning of the journey. In fact, we are simply repeating the same cycles and mistakes that all of our ancestors have made before us. Every culture throughout history has done exactly what we are doing now. The only difference is that this time it involves the entire planet.
As we read history, paper money was not designed to be an asset. It was an intermediary between sellers of goods and services. A seller might not have an immediate purchase in mind, so receiving a paper receipt that could be redeemed at a later time, and even at another location, was both efficient and much safer than receiving payment in gold or silver. The return trip from Rome to London was perilous under normal circumstances, let alone if one was returning with precious metals.
In our era, these receipts have taken many forms. Even the cash in our pockets is a derivative. In technical terms, it is a zero-coupon, perpetual obligation of the issuing government. In essence, the writing on the paper currency is promising “somebody owes you something, someday”.
The post-WWII monetary system began at Bretton Woods, New Hampshire. It began to unravel in the middle of the 1960s, but the mortal blow was struck by President Nixon with the suspension of dollar/gold convertibility. It has certainly been a long “suspension”.
Almost every ugly chart relating to the growth of debt and money can trace it’s roots to 1971. The evidence is incontrovertible. The value of the ancient form of receipts has been sliding ever since. The slide has not been linear over that 40-year period, but it certainly went into free-fall 12 years or so ago.
In the past, rulers created money out of something considered to hold value, often gold and silver. Seignorage was the right of kings to make a profit on that money. Unlimited seignorage was impossible as supplies of gold and silver came and went, and it was expensive to mint the coins.
With the use of paper and now electrons to create money, we now have unlimited seignorage. Money is created out of nothing, and you can see how it has been abused in the post-1971 charts. The abuse is accelerating on a massive, global scale. Cash and other derivatives have replaced our markets. Profits were to be made on creating and trading derivatives, not providing real goods and services. The real aspects of our economies continue to function, but the derivatives dwarf the size of the real global economy.
Much has been written about the historic confluence of our population growth coming together with the exponential endpoint of our resources. The same can be said for our money. Our resources are finite. The ability of our planet to sustain a population is finite.
We are now witnessing the exhaustion of our savings and real assets and our ability to sustain an exponential growth in money and derivatives. Unlimited derivates are hitting the proverbial brick wall, and their collapse will destroy everything based upon them, it is just history. This cycle has been repeated time and time again.
We also believe that we are approaching the end of a wonderful 200-year period in human history, driven by the industrial and technological revolutions. The exponential usage of resources and our population growth began almost precisely 200 years ago. If we combine this resource endgame with various groups which are desperate to maintain power or inflict it on others, it is a very toxic historical “soup”.
As to the resolution of what comes next, it is impossible to say. There are too many moving parts, or ‘Black Swans’ as people say. All we can do is to pay careful attention to events as they unfold, looking for clues as to how this mess will play out.
For our portfolios, the message is clear. Get out of paper assets that can be destroyed by the unlimited seignorage, and convert them into real assets. The end of the fiat money system will come swiftly, and perhaps overnight. It cannot be too far off at this point.
Changes are coming, but it doesn’t mean the world will come to an end. But financial regime changes do result in a massive transfer of wealth from those who own paper assets, to those that own real assets. Historically, gold and silver are traditional safe havens.
Despite what we read, the physical supply of these metals is becoming diminished for a variety of reasons. Waiting too long to purchase them could result in the inability to do so or certainly being forced to buy at much higher prices.”