In America, a land of plenty, the economy is in the gutter,
incontinent government spending is coupled with out of control budget deficits
resulting in ballooning debt, bankrupt States, skyrocketing unemployment with
benefits ending is compounded with manic-depressive politics
while commercial real estate is imploding, earnings of publicly traded
companies are cratering, the remaining liquidity in the financial markets is
illusory from the likes of program trading via Goldman Sachs and there is a
new weekly event called ‘bank failure
Friday’ with the FDIC now bankrupt and would be
insolvent but for its line of credit with the Treasury.
The solution from Wall Street and Washington appears
to be quantitative easing which is
doomed to failure as they intentionally exacerbate the greater depression.
Consequently, for good reason the general sentiment for the Federal
Reserve Note Dollar (FRN$) appears to be particularly bearish.
FUNDAMENTALS
The FRN$ is doomed. It is intrinsically
worthless and like all other fiat currencies will be relegated to the annals
of history. But the FRN$, a mere figment of people’s imagination,
is still a strong hallucination. It is this misplaced trust, confidence
and reliance that leaves it with a bid.
Perhaps it is the pragmatic irrationality based on the human
action of billions of individuals that leads to a valuation for this
worthless illusion. So while the ultimate consequence is predictable,
complete worthlessness, the timing is unpredictable.
This is like the Heisenberg Uncertainty Principle from
quantum mechanics which states that certain pairs of physical
properties, like position and momentum, cannot both be known to arbitrary
precision. That is, the more precisely one property is known, the less
precisely the other can be known. It is impossible to measure simultaneously
both position and velocity of a microscopic particle with any degree of
accuracy or certainty.
The merger of State and corporate powers is fascism.
In the blink of an eye the remaining remants of free market capitalism
was eviscerated and at the stroke of a pen on the bailout bills the
democratic Republic was replaced with rule by an oligarchy. But fascism
desires unity as even the symbolism of the fasces suggests strength through unity:
a single rod is easily broken, while the bundle is difficult to break. Currency controls are used to
force ‘unity’ and in the modern age the creation of new FRN$
illusions is done by punching buttons on a computer and they have no basis in
reality.
TECHNICALS
If China were to diversify away from the FRN$ or
significantly reduce their holdings then it would be, in the eyes of America,
tantamount to declaring financial war. While China may be rising
economically, as its monstrous increase in official gold reserves shows, it
still has a long way before it catches the United States militarily.
The massive FRN$ holdings by China and Japan gives them tremendous
leverage in the market.
But the United States is the world’s sole
superpower and as explained in John Perkins’ Confessions Of An Economic Hitman its resolve to respond
to financial, geo-strategic or political threats, either overtly or covertly,
is extremely strong. Perhaps the greatest threat to the American Empire
is the central bank gold price suppression
scheme.
The USD Index, which is composed of about 60% of the
Euro and another 20% from the UK, Sweden and Switzerland, has undergone a
tremendous decline this decade. Europe and the UK, with the Bank of England
engaged in quantitative easing, are in worse condition than the United
States. The critical
70 level was even briefly breached in early 2008.
The massive Sichuan earthquake was the 19th most
deadly in history leaving about 70,000 dead, 18,000 missing and about 375,000
injured. Shortly afterward the USD Index had a significant bear market
rally.
But in June 2009 the 50dma and 200dma crossed and
the 200dma has now turned negative which has led to much of the bearish
chatter. But I doubt the Chinese either want to see the value of their
reserves decline further or start a financial war by dumping their FRN$
reserves.
As the New York
Times reports:
China’s main complex for making nuclear
warhead fuel, codenamed Plant 821, is beside a river in a hilly, forested
part of the earthquake zone. It is some 15 miles northwest of Guangyuan in
Sichuan Province. The vast site holds China’s largest production reactor
and factories that mine its spent fuel for plutonium — the main
ingredient for modern nuclear arms. …
North in an even more rugged and inaccessible
region, nuclear experts said, China maintains a hidden complex of large
tunnels in the side of a mountain where it stores nuclear arms.
“It’s very close to the
epicenter,” said one specialist, who spoke on the condition of
anonymity because, to the best of his knowledge, the exact location of the secret
complex had never been publicly disclosed.
But surely this massive 8.0 earthquake, the effect
on China’s nuclear program and the subsequent rise in the FRN$ were
merely coincidences and not the result of the HAARP program as asserted by
Benjamin Fulford, Asia-Pacific Bureau Chief for Forbes Magazine from
1998-2005. But such a tale would make a great script for a fictional movie like The International or GI: Joe.
After all, the United States wears the fascist white
hat to spread democracy and would never intentionally murder hundreds of
thousands of innocent civilians in an effort to defend their fiat currency
and banking oligarchs. The FRN$ appears to be reaching some critical
technical points where a severe breakdown could happen. But when there
are key technical levels rest assured that the American Empire will likely
move heaven and earth in an attempt to perpetuate their power.
GOLD
Until about 2005 the price correlation between gold
and the FRN$ was extremely strong with an r-square value around 90%. As
the currency collapse has continued
the r-squared value has declined. While the FRN$ and USD Index may
rally gold will not necessarily decline. Gold, silver and platinum are money and extremely safe and liquid assets in which
to store capital. These are prime characteristics sought by investors
during The Great Credit Contraction.
Nevertheless, this will be played out over years and
there will be undulations as there are periodic periods of bullishness
accompanied by risk taking by those who mistakenly act upon the green shoots diagnosis.
What is important is to keep the key
ratios in mind and use them to make purchases after the coming market crash.
CONCLUSION
The American Empire is still the sole world
superpower. Its economy is withering, banks are failing, currency is
collapsing and banking oligarchs are looting
with reckless abandon and bankrupting for profit.
The dissipated rule of law does not even
provide an unintelligible answer to What Is A Dollar? Gold and other monetary metals stand as the
bulwark for capital preservation despite the often empty rhetoric about inflation versus deflation.
While the fundamentals for the FRN$ are terrible the
technicals seem to suggest there may be a bear market rally coming. If
that occurs then there may be a decline in the FRN$ price of the monetary
metals. But taking the risk by moving up the liquidity
pyramid into less safe and less risky assets in the hopes of profiting
may be a fool’s errand and preparations for survivalism in the suburb
and learning how to vanish may be a wiser allocation of capital.
America is ground zero for this currency collapse, which has only just
begun, and if you think she is a rogue elephant on the world stage now just
wait until she is truly panicked.
DISCLOSURES: Long physical gold, silver and platinum with no position
in the problematic GLD or SLV ETFs.
Trace Mayer
RuntoGold.com
Trace Mayer, J.D., holds a degree in Accounting from Brigham Young University,
a law degree from California Western School of Law and studies the Austrian
school of economics. He works as an entrepreneur, investor, journalist and
monetary scientist. He is a strong advocate of the freedom of speech, a
member of the Society of Professional Journalists and the San Diego County
Bar Association. He has appeared on ABC, NBC, BNN, many radio shows and
presented at many investment conferences throughout the world.
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