Before getting to the topic of “all in!”, I have a story for you which may
be of interest. All the way back in 2002, I travelled out to Colorado
Springs for the shareholder meeting of a very small and obscure royalty
company named Golden Cycle Gold. While there, we did a tour of the
Cripple Creek mine and its operations. The nearby town, Victor, looked
nearly like a ghost town 30 miles off the beaten path. The only
industry was the mining operation and a little bit of
tourism. During my trip, I met a long time Director of the Golden
Cycle Gold Company, “Frank,” he had a different view of economics than almost
anyone I knew. He believed the U.S. was bankrupting the country with
armaments manufacturing, just as did the old Soviet Union and that the U.S.
would eventually meet the same economic fate during a currency collapse of
the dollar, as had happened to the ruble. ..
Frank and I spent almost two days together and I furiously picked his
brain. He was a fountain of information as I learned more about
the mining industry from him than any other source.
He said; ” gold was an immutable object,… it didn’t do anything,… it just
sat there….. it was just one ounce of gold,… it was paper money that
historically depreciated in terms of the yellow metal.”
Frank was drawn to the Golden Cycle Company by a statement made by
famous financier Charles Allen of Allen &Co., who said: “If monetary
conditions were right, the Company could make stock market history, “(the
Allen family had escaped Europe just prior to the worst of the Holocaust and
understood the value of gold money).
As time would have it, the Company was sold. He said; never ever did
anyone ever believe the conditions we are witnessing today could have been
extended into the hereafter, with printing press money, without a major
economic collapse and depression. Symbols for the theft of the public’s
buying power by banks, such as QE, were not even part of the financial
lexicon. The only analogy he knew had relevance to today’s financial
situation was during the days of John Law and Fiat Money in France in the
1700′s… He now says; “Those conditions, or happenstance, so well
understood by Charles Allen, exist today, ….. for Gold and Gold shares to
make market history,……. (in this poker game of International Finance), he
says; ALL IN!
After the first day in the field, we met for dinner and a few beers (where
we met a 6′ 9” Australian with long blonde hair who put Rambo’s physique to
shame …turned out he was an international (legal) arms dealer!). This
is where I first heard of the concept “re set”. He talked about gold
demand outstripping supply, manipulation and many other topics which I was
aware of but only scratching the surface at that point. The biggest
thing he talked about was “collateral”, or lack of it. He posited the
system was nearly at full margin in a sane world, the only two outcomes could
be some of the debt being cleansed, or exactly what followed. Namely
interest rates being crushed with anything and everything not nailed down
being used as collateral for margin. In retrospect, he was early but
very correct how this would all unfold.
The reason I relate this story is because back then I needed something or
someone to “strengthen my knees”. Gold and silver would get smashed
when logic said otherwise. Very little information was available on the
internet to that point other than a few websites including GATA. Jim
Sinclair had just begun posting for another website and had not even gotten
his own up and running. Back in those days, the biggest shot of
adrenalin was when John Embry who worked for a mainstream Canadian bank wrote
publicly about blatant manipulation. John’s writing was sorely needed
by the gold community to confirm their thought process. It is in
good part this very reason I began to write in 2007, to hold shaky hands and
to calm the fearful. Most of all after this trip, many of my thoughts
were confirmed and cemented. To Frank, my mentor, I owe a huge
debt of gratitude!
As for my topic “all in”, should you be? My answer to this is to be
as fully invested in precious metals assets as you are comfortable
with. Please understand this, because central banks, sovereign treasuries
and behemoth financial institutions are already “all in and then
some” with their support of paper assets …when the dam breaks you will
most probably not have the chance to go “further in” with precious
metals. Bad money will chase good money into hiding and be met with
“not for sale” signs.
This concept of “all in” has been personified, only in reverse by the
world’s central banks, treasuries and financial institutions. They have
created $ trillions upon $ trillions of new currency, they have borrowed even
more $ trillions while the institutions play in over a $1 quadrillion
casino. Any thing “marginable” has been used and already borrowed
against. Interest rates have been crushed to zero and below by the
necessity to be able to pay the interest while stock markets float
higher with little to no volume as the HFT algos swap some spit back and
forth. Real gold and silver have been sold 100 times over and are
fictitious in pricing and availability.
If you did not understand the meaning of the above paragraph, I will spell
it out. The world is one giant and collective margin call. “Net
worth’s” that are calculated, relied on and believed in today could be
seriously cut, wiped out or even become negative overnight. “This can
never happen” you say? It already has in many instances for those long
euros or short francs on margin …and this was only the tip of the
iceberg. Do you suppose some oil traders, or even some drillers and
producers have gone belly up? We know they have. EVERYTHING paper
has the very same affliction as oil and this FOREX cross, the values are
skewed! Not only are they skewed, this has been purposely done.
The problem is with the “manner” in how it has been done. Derivatives,
or leveraged paper, has been used to paint a picture necessary to retain
confidence. As this picture morphs from true realism to more and more
abstract, confidence ebbs with it. As more and more financial soldiers
fall, other troops begin to worry, drop their arms and turn tail. This
is how it works. Panics occur because confidence decreases.
Looking at the real economy, how much more can we expect out of it?
Corporations have supplanted small business and in their quest for profits
are cutting jobs and expenses to the bone. Can young people afford to buy
entry level homes to help push current owners to the next level? Can
the working population support a 50% and growing portion who collect
benefits? How long can parents support 25 and 30 year old children who
cannot afford to provide for themselves? Who will support the
parents? It never “was” like this because it could not be, it was not
and is not sustainable. What Washington and Wall Street have forgotten
is oh so important yet ignored. In order to have truly healthy
financial markets, the real economy must function and function well.
The real economy is just as far over the cliff as the federal fiscal
situation with no one left able to either pass the baton or to save the day.
Let me finish with these thoughts. It used to be the real economy would
generate cash flow in excess of what was needed to fund current operations
and to pay debt, this is no longer so. The necessary “cash” is now
coming from the central banks because the economy is no longer
sufficient to do so. This is why it “feels bad” out there, there is
little money making it to the streets. Soon it will feel even worse
because even with bogus and fudged numbers, an official recession is again
arriving. How much further can the central banks go? Further than
“all in”?
