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Debunking Tapering Mythology

Gold Commentary

One could only hope that after nine, nauseating months of lies and half-truths from the U.S. Federal Reserve and mainstream media on so-called “tapering” that we would be spared any more of this nonsense in 2014. Sadly, since the mainstream propaganda machine found this a very fruitful form of lying in 2013, and since it is rapidly running out of any other semi-plausible fiction to use in holding together our smoke-and-mirrors economies; it appears that “tapering” is here to stay – i.e. talk about “tapering”.

The improving economy led the Federal Reserve to begin tapering its bond purchases this year. Monthly purchases of government bonds and mortgage-backed securities will be reduced from $85 billion to $75 billion this month, and it is likely that the quantitative easing program will come to a close by the end of 2104. [sic]

The delightful “Freudian slip” above by the Conference Board of Canada is the nexus of all this propaganda, and so it is the first point which must be stressed in debunking the lies. There is no “tapering” taking place in the United States, in fact most likely the money-printing has increased. A previously familiar chart (below) demonstrates this.

Where is the supposed “tapering” which took place last year? It’s not here, meaning that no reduction in the money-printing ever took place.

But regular readers undoubtedly have another question. Why does this chart of the U.S. adjusted monetary base now appear stretched-out, rather than the simple, vertical line that they are used to seeing? Because a chart which used to be scaled in decades is now scaled in years. Throughout the entire (modern) history of the U.S. dollar; changes in the monetary base have been so slow/gradual that the chart which measured the monetary base could be scaled in decades.

Today, with the Federal Reserve’s virtual “printing press” running white-hot, 24/7; the only way we can still see incremental changes (i.e. anything other than a sheer, vertical line) is by stretching-out the scale of the chart dramatically. The simple fact that this chart has been re-scaled tells us there will be no tapering. No reputable institution would change the scale of a key statistic temporarily, for just a few months. If the Federal Reserve had any serious plans to “taper”; it would have never changed the scale of its own chart measuring the (official) money-printing.

 

2013: A Successful Year of Price-Suppression: Part II

International Commentary

Part I of this series ended with some rather ominous questions. Most of those questions tied-in to the chart below, and what it signified in both practical and statistical terms:

Here readers see a picture which is markedly different from the parameters we know to exist with (for example) precious metals. With gold and silver; we have two commodities where production is (now) falling, and inventories are (already) near-zero. It’s easily understandable why these commodities are already at a crisis-point in terms of basic supply/demand analysis.

It is much less-easy to understand why the chart above also represents a looming crisis. This is due in large part to the obvious/unequivocal importance of food production. Because food (self) sufficiency is a key policy objective of almost every nation; their reactions to the food-crisis looming ahead of us have coloured this data – and thus (somewhat) hidden the underlying problems.

It’s also important to point out another premise of simple logic. Because food-production (and sufficiency) will always remain a top priority; in the attempts to ward-off a near-term food catastrophe we could (will) see our governments simply trigger a different form of economic cataclysm – hyperinflation – which will also lead to mass hunger/starvation, but simply in a less-direct route.

Here it is necessary to itemize the causal links in this (inevitable) chain. To do so; we start by simply looking at the current trend which the chart above indicates unequivocally: the ratio of inventories to supply/demand is falling – and at a rapid rate. While this does not appear close to any crisis-point (at present); we can understand that the continuation of this trend will (at some point) take us to parameters which will look very similar to what we see in precious metals today.

So how/why does this trend represent an immediate – and enormous – problem? This is where it is necessary to add all of the additional, necessary economic/financial context to make the answer to this question self-evident. In the most general terms; what is the root problem leading to inventory-destruction in all commodity markets (especially precious metals)?

 

2013: A Successful Year of Price-Suppression, Part I

International Commentary

There must certainly be times when regular (and objective) readers ask themselves if it is not me who is “living in fantasy-land” rather than – as alleged again and again in these commentaries – the drones of the mainstream media. There was an example today of an item from Bloomberg (and the “statistic” it contained) which might create such doubts in readers’ minds.

Wholesale prices in the U.S. climbed in December for the first time in three months to cap the smallest annual increase in five years, showing companies face little pressure to charge more…  [emphasis mine]

Where is the “hyperinflation” which I (and John Williams, and others) insist is already ‘in the pipes’ of the global monetary/financial system? While readers have seen a chart (on numerous occasions) showing U.S. money-printing in an exponential spiral – a near-vertical line, to be precise – we see wholesale prices actually moving in the opposite direction.

How is this possible? Or, put another way, who is telling the truth? To answer these questions; let me ask an additional and more specific question. Why do precious metals prices not reveal the hyperinflationary pressures which are alleged to exist? Regular readers and knowledgeable precious metals investors would have no difficulty answering that question in a convincing manner: price-suppression.

Over recent years; readers have been supplied with overwhelming evidence of price-suppression/manipulation in precious metals markets, and in a variety of different forms:

1) Bullion-leasing fraud

2) Regulatory malfeasance

3) Falsified data/statistics

4) Outrageous ratios of paper to bullion in markets

5) The collapse of global inventories of gold and silver

Overlaid on top of this; we have the daily price-action in these markets: endless, repetitive examples of vertical lines, as prices “gap” lower (and sometimes) higher in these large, global futures markets. Here readers need to know the history (and math) behind these futures markets.

Why do we even allow these fantasy-markets, where the paper traded by the banker-gamblers of the 21st century exceeds the actual commodities they are trading by fantastic ratios, in the case of bullion, ratios of greater than 100-to-1? Because these very same banker-gamblers assured our governments and (supposed) regulators that these futures markets would bring much greater “liquidity”, and thus near-perfect “price discovery”.

Translation? Futures markets should never gap higher or lower, with the rare exceptions of truly momentous events which can/could cause legitimate surges or plunges in price. The daily trading of the bankers themselves is empirical proof that these markets are being constantly manipulated. The outrageous/indefensible Pied Piper trading algorithms which these banksters use is the “smoking gun” which provides the unequivocal means to perpetrate such market crime.

Thus do we have my broader answer (and rebuttal) to the original questions. Wholesale prices (and the commodities prices which underpin them) do not reveal the enormous hyperinflationary pressures created by the money-printing of our central banks because of the constant price-suppression of the One Bank – across virtually all commodity markets – which depresses the prices which should be indicating those pressures.

Fortunately, there is equally compelling evidence to support my allegation that the same price-manipulation we see on a daily basis in precious metals markets extends across the entire spectrum of commodities. Once again; it is the daily trading of the banksters themselves which provides us with absolutely conclusive evidence.

   

Creeping Zeros and Economic Armageddon

Gold Commentary

Regular readers are familiar with my characterization and observations concerning the Corporate media propaganda machine. This oligopoly disseminates its “news” as a single, monolithic herd. This, by itself, is conclusive proof that we are dealing with propaganda (and brainwashing), as any legitimate “free press” always exhibits considerable diversity of opinion.

However, one important facet of this brainwashing/conditioning requires no deceptions or distortions of any kind in order to achieve the desired effect: apathy and confusion. As an inevitable consequence of “inflation” (i.e. the relentless/excessive money-printing of the One Bank);  the numbers we use in discussing the parameters of all our economies are increasing, and at an exponential rate.

This phenomenon of arithmetic is known as “creeping zeros”. But what is important for this discussion is not the arithmetic, but the inevitable psychological ramifications of creeping zeros. Specifically, as the numbers increase in size at an exponential rate; our understanding of these numbers decreases – proportionately.

The implication of this is hopefully obvious to most readers: the bigger the crimes of the One Bank, and the faster it piles one mega-crime atop another, the faster we lose the capacity to understand the magnitude of these crimes. When it commits crimes involving numbers which are literally beyond human comprehension, it becomes logically impossible to truly understand these mega-crimes, themselves.

It is necessary to inject some hard numbers here to facilitate understanding. The largest number which we puny humans can fully understand is (roughly) one million. It requires no academic credentials to make such an assertion, because the basis for this conclusion is tautological in nature.

Generally speaking (and as simple, common sense), we can only “understand” what we are capable of perceiving with our senses. You cannot explain “colour” to someone who has been blind all of their lives. You cannot explain “music” to someone who has been deaf all of their lives. They lack the sensory capacity to genuinely understand such concepts.

Similarly; while we can be told what an “atom” is, we cannot truly grasp the nature of these particles – save for the very few who can observe them (somewhat) via the aid of an electron microscope. This lack of comprehension also applies to phenomena in the universe which are too large for our comprehension.

It is accepted universally that the universe itself is beyond our intellectual grasp. When we look into the night sky; our (unaided) vision extends only out into a small portion of a single galaxy. And even boosted to the greatest extent which our technology allows; we still know our vision our encompasses a microscopic portion of infinity.

The question here then becomes: what is the demarcation point of our comprehension; at what point do numbers themselves become too large for us to understand? The answer to that question is “one million.”

For city-dwellers who have access to elevated viewpoints; we can see one million – the populations of our own cities. We can’t actually “see” the one million (puny) inhabitants themselves, but we can see their dwellings, from which it is a very small extrapolation of logic to comprehend the number of inhabitants. Anything beyond one million is too large for us to truly understand, because it is totally beyond our sensory capacity.

We can have a very crude understanding of one billion, as it is the concept of quantum immediately above the largest number we genuinely understand (and the numerical representation of the entire, human population). But once we reach “trillions”; such numbers become totally outside of any/all mathematical comprehension of virtually our entire species.

The natural question which would occur in the minds of many readers is: what makes me competent to engage in an analysis of this nature – as an authority – when I am also a puny human, capable of fully understanding no number larger than a million?

 

Fiscal Responsibility in the Real World

Canadian Commentary

It is both ironic and pathetic that as our corrupt, Western governments drown in their own self-created insolvency, these weasel-politicians spend more time talking about “fiscal responsibility” than at any other time in modern history. However, as with most of what our politicians talk about; they have little-to-no understanding of this subject themselves.

A simple hypothetical example will bear this out. Suppose we have a Corporation in serious financial difficulty. It’s spending is roughly flat (in real dollars), but its revenues (also in real dollars) have collapsed. Despite this “revenue crisis”; the Corporation completely ignores revenue-generation, and obsesses entirely about slashing spending.

It performs this cost-cutting primarily through laying-off its own employees (and/or slashing their wages and benefits), which reduces its own revenues even further. What is the one thing which we know for certain about this Corporation? It will go bankrupt in the near future.

This hypothetical corporation is, of course, an identical representation of our own, corrupt/incompetent governments. While we suffer through the greatest revenue-crisis in the history of our nations; all the politicians ever talk about (and occasionally do something about) is cutting spending.

Who continues to advise our idiot-politicians to continue slashing spending (in order to ensure that their minimal brainwave activity is never directed toward increasing revenues)? The deceitful bankers and the even more-incompetent economists. Of course it is this same cast of liars and fools who are 100% responsible for creating both our revenue-crisis and our solvency-crisis (which has resulted).

It was the bankers who assured our governments that they had “discovered” a magical financial formula which would permanently allow all our governments to borrow money at much lower interest rates, and thus (“safely”) carry much more debt. It was the pseudo-expert economists whose “forecasts” proved to be absurdly optimistic, and thus woefully inaccurate.

Why did the bankers (always) lie? Why were the economists (always) wrong?

The bankers lied to our governments about financing their debts for two, equally important reasons:

a) They wanted to bury our governments in debt, and thus enslave us in debt to these very same bankers (or, more specifically the bankers’ Masters).

b) They wanted to ensure our governments never engaged in fiscally-responsible economic policies, specifically that they failed to produce adequate revenue-streams to accompany their (rising) debt-loads.

The economists were wrong for a plethora of reasons, broadly broken down into two categories: their biases/blind-spots, and their utterly inept attempts at analysis and prognostication. Some of these biases can be summarized as simple, class-based elitism; it is beyond the scope of this piece to cover the remainder of those (numerous) biases.

The ineptitude of these economic charlatans also has numerous facets. Perhaps their greatest failing can be roughly summarized as their inability to perform dynamic analysis, and thus their insistence on engaging in static analysis. These terms are likely unfamiliar to readers.

Simplified; static analysis is analysis where one’s modeling is based upon a world which never changes. Conversely, dynamic analysis (as the name suggests) is analysis which does incorporate change into its modeling – and future forecasting.

Because we live in a world of change; static analysis is always grossly inferior to dynamic analysis. Because we live in a world of exponentially increasing change; this inferiority of analysis has also increased exponentially. The economists have not simply been “wrong”, they have been spectacularly wrong.

   

When Deflation Becomes Hyperinflation

Gold Commentary

As we begin 2014; it seems incredible to me that we still have what is known as “an inflation/deflation debate” raging. But a debate which was merely frustrating five years ago is now absurd; because it is founded on an entirely false paradigm.

What is logically implied in this “debate” is that spiraling inflation or crushing deflation are alternative scenarios; when, in fact, it has been patently obvious for many years that these two forms of economic cataclysm not only can be but must be concurrent (if not simultaneous) scenarios.

Here I can claim no personal credit, as others saw the degeneration in the West into literal “Ponzi economies” sooner than myself. Darryl Schoon (for one) recently noted his own previous work in this area, and he, in turn, credited Bill Bonner with reaching this conclusion earlier than himself, going all the way back to 2006.

Even beyond this; there has been the work of John Williams, the eminent producer/creator of Shadowstats.com. It is Mr. Williams who first made the quantum leap in analysis in noting as our debt-saturated economies crumbled towards collapse – and fiat money-printing increased exponentially as a result – that “inflation” and “deflation” were not competing scenarios. He coined the term “hyperinflationary depression”, one which I subsequently adopted in my own work.

As we careen into a Greater Depression with nothing but “the Great Depression” to guide us as a template; what caused John Williams (alone among all analysts) to realize that this time it is different? Much like we could classify the fictional genius of Sherlock Holmes as “mere observation”; we could similarly abbreviate Williams’ brilliance as “mere arithmetic”.

What is different in the Greater Depression unfolding before us today, versus the Great Depression which occurred one Kondratieff Winter before this? It’s the arithmetic.

With few exceptions; all the larger economies in the world of 1929 were solvent, and (prior to the Great Depression) relatively healthy. The anemic, debt-saturated husks of the 21st century bear absolutely no resemblance to the robust economies of that era.

A healthy person can suffer through a serious illness, or engage in a stringent diet (or even fasting), and then expect to recover their vitality once the illness or self-imposed fasting had ended. However; put someone already suffering from anorexia on a severe diet and you kill them.

The Great Depression of 1929 was an economic catastrophe; a severe illness inflicted upon otherwise healthy economies. The Greater Depression of the 21st century is an existential event; where the current economic order is in a terminal descent. It is the combination of a severe economic epidemic ravaging a collection of already economically-crippled nations which makes these two, seemingly parallel catastrophes entirely distinct events.

Specifically, it is all about simple arithmetic. What were most of the nations of the Great Depression-era forced to do, in order to help their own populations weather that economic storm? They borrowed more money, generally much more. To use some of our own, modern vernacular; they “ran up their credit cards.”

What is the recourse of the debt-saturated economies of the 21st century, as this Greater Depression descends upon us? Our “credit-cards” are already maxed-out. And so these sovereign Deadbeat Debtors of the 21st century print ‘money’: more and more and more of it, backed by nothing – not even their own “IOU’s”.

Here we see the prediction of John Williams manifest itself in black-and-white (in a chart which regular readers are undoubtedly sick of seeing):

 

Interest Rate Fraud

International Commentary

In our surreal, “Matrix” societies; one financial crime stands out above all others in terms of its relentless and pervasive impact in strip-mining all of the wealth out of our economies: interest rate fraud. It is the cornerstone of the financial crime empire of a crime syndicate previously dubbed “the One Bank”.

This commentary will focus on two themes:

1) All of the interest rates used to siphon the wealth from our societies are the direct result of illegal manipulation. Thus all contracts requiring the payment of interest are null-and-void, as a basic principle of Western legal jurisprudence.

2) Examined over time, the clear financial objective of this interest rate fraud is an economic paradigm which can only be characterized as “debt slavery”.

The obvious starting point in this analysis is demonstrating the endemic illegality at work here. Once fraudulent/criminal intent is established, the remainder of the analysis acquires additional credibility. Various forms of empirical evidence are available.

First we have “LIBOR” (London InterBank Offered Rate), the single most-important interest rate in the Western world; the basis for over $500 trillion in commercial activity. Here we have confessed financial fraud; admitted collusion between the handful of Big Banks who set the LIBOR rate, secretly.

LIBOR itself is created through a totally opaque, (supposedly) anonymous process which could not possibly be contrived to make the illegal manipulation of this rate any easier. And the Big Banks who “collectively” set this rate have now been all identified as mere tentacles of the One Bank. This is not merely a gigantic act of fraud (the largest, single financial fraud in history); it is a system of fraud.

We then move to the next-largest sphere of fraud: the individual, national interest rates of the various Western governments. Our interest rates are all set by “central banks”; ultra-powerful, privately-controlled, financial entities which are not only completely “independent” of the governments they supposedly serve, but as we have now seen in many instances, these “banks” are completely above the law.

Indeed, the Bank for International Settlements, whom the bankers themselves identify as “the central bank of (Western) central banks” is a fully sovereign entity, officially above all the laws of the nation in which it is geographically located, Switzerland. The other central banks are merely unofficially above the law; such as when the Federal Reserve refuses the most-basic function of financial accountability in any legitimate system: a public audit.

More importantly, these shadowy, private, totally unaccountable institutions have been handed monopolistic control of our national “printing presses”, in perpetuity. Absolute control over interest rates. Absolute control over the money supply. Absolutely zero accountability. Again, we have nothing less than a system created with the sole intent of perfecting financial fraud.

   

Silver Bells

Silver Commentary

As the Christmas season passes, and the end of 2013 is upon us; this is a natural time to reflect upon what has transpired over the last year in the precious metals sector. Obviously 2013 will not be viewed as a good year, in retrospect, by precious metals investors.

This was the year of Hostage Markets; the year that the One Bank demonstrated in its own, inimitable, heavy-handed manner that it had corrupted our markets to the point where it could freeze bullion prices at any number it chose – regardless of supply/demand fundamentals. However, while these fundamentals have become virtually invisible, by no means have they ceased to exist.

Rather, in exerting absolute short-term control over bullion markets the One Bank has inadvertently once again demonstrated its (long-term) impotence against those fundamentals. When it perpetrated the Cyprus Steal to create a “precedent” for its newest form of paper-theft (the “bail-in”); the One Bank caused a stampede out of its own paper-called-gold, and an unprecedented collapse in the entire paper-gold market.

Worse still (for the Bankers), this exodus out of paper-called-gold manifested itself primarily in the form of a stampede into real, physical bullion. In part; this was a reflection of paper-called-gold holders swapping paper for metal – with the inevitable effect of a massive draw-down in Comex inventories.

However, the stampede out of paper-called-gold also caused an inevitable plunge in the price of gold, all “gold”. Thus at the same time that Western paper-holders were causing an artificial drop in the price of gold by moving from paper to metal; Eastern gold-buyers also stampeded into the market – attracted by the give-away prices created by that exodus.

Indeed, as reported earlier this year; at one point gold imports into China and India alone had spiked to an annualized rate of about 4,000 tonnes/year. This occurs in a global market where annual mine-supply is well below 3,000 tonnes/year, and falling.

Facing a new “supply crisis” in bullion markets (and again one of its own creation); the One Bank responded with its most blatantly brutal tactics to date. By manipulating the exchange rate of India’s currency to a record-low (via its now-exposed FX-rigging); the One Bank blackmailed the government of India into suspending all gold imports into the world’s largest gold market.

The Laws of Supply and Demand responded, again. Part of the frustrated demand for gold within the Indian population re-ignited gold-smuggling into India. Indeed, the government of India had spent years liberalizing trading rules for importing gold into the country precisely because gold-smuggling had previously been so prevalent. Thus it required only days to re-open those dormant smuggling routes.

However (as also previously noted) part of the frustrated demand for gold in India has morphed into demand for Poor Man’s gold: silver. A year which started out appearing to be a record year for Indian gold-imports quickly pivoted into a year of record silver imports instead.

 

The Leverage of Debt and the Levers of Power

International Commentary

In a previous commentary, The One Bank, readers were presented with the dominant social/economic/political menace of our era; one, gigantic financial monopoly which by itself controls 40% of the entire, global economy.

That previous piece introduced readers to the litany of financial mega-crimes perpetrated by this Crime Syndicate, the endemic corruption which allows these crimes to occur without any impediment (let alone punishment), and the primary means to achieving that level of corruption/control: debt.

The evidentiary basis for this construct is a persuasive piece of economic modeling, conducted by a trio of Swiss academics, which has been favorably cited by several other writers/sources. They arrived at their conclusions through mathematical analysis of a huge data sample of more than 30 million “economic actors” (primarily corporate entities).

However, while that previous piece was based upon a solid evidentiary foundation; skeptical readers may still have had trouble accepting the validity of the level of corruption asserted within that analysis. Even though (if it were a nation) the One Bank would have a “GDP” roughly double that of the United States; skeptics may have still found it difficult to accept that one Crime Syndicate (in any form/size) can exert essentially absolute control over entire governments.

To facilitate bridging this gap; this piece will focus upon how “control” of that magnitude is achieved in general terms, by first noting in specific terms how debt (and debt-leverage) is such an insidious tool in creating a “slippery slope” of corruption. It is a slide which (inevitably) leads to the saturation-level of corruption which now exists in our societies today.

Give me control of a nation’s money supply, and I care not who makes its laws.”

- Mayer Amschel Rothschild

That (in)famous quotation was cited in a recent commentary, but accompanied by what was (in hindsight) an inadequate degree of elaboration:

Whoever controls the money-supply of any nation/economy can simply funnel infinite amounts of free money into their own pockets – and with that money they can buy all the lawmakers. This is precisely the reality we face today.

While this accurately summarized what has taken place in our societies, the important omission was in not explaining how having the power of the printing press translates into the control of governments (and entire nations). To understand this requires understanding debt; more particularly, fully understanding the relationship between lender and debtor.

The starting point is in noting the transformation which has taken place between classical “capitalism”, and the bastardized neo-capitalism which has evolved out of it. Pure capitalism (the original model for our economies) was an efficiency-based doctrine aimed at maximizing the productive output of the three basic inputs of any economy: labour, raw materials, and wealth (i.e. capital).

Through the efficient allocation of these inputs, a capitalist system generates “profits” (i.e. more wealth/capital), and then that wealth is reinvested into the system, in a virtuous cycle of healthy/stable growth. Neo-capitalism, on the other hand, is essentially nothing more than “capitalism on steroids.”

Not surprisingly, this has in turn evolved into capitalism abusing steroids. What do we know about the abuse of steroids from countless (disgraceful) examples in the realm of sports? Any short-term benefits achieved through this form of cheating are accompanied by significant long-term penalties in terms of irreparable damage to one’s health. This is precisely what we see in the 21st century with neo-capitalism, and our irreparably-damaged economies.

What is the distinction between capitalism and (our own) neo-capitalism? Capitalism is a system based on the optimal utilization of wealth. Neo-capitalism is a system based upon utilization of credit (i.e. debt), and more specifically leveraging and re-leveraging that debt. It is a totally irrational/unsustainable economic model of infinite growth in a finite system, and entire theses could be written on this subject alone.

   

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