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"No one and I stress
no one is able to predict with certainty how and when the whole situation
will unravel. The reason I say this is because no one can predict what
irrational schemes the governments of the USA and Europe will try to put into
practice."
I wrote the above back in
March 2009 when I submitted my first article titled, "The Party is Over.
Let the Hangover Begin." Not a bad prognosis of future events, if you
will allow me to say so.
In the last four years we
have had a steady procession of debt fuelled plans to save the world from
financial implosion. The creators of QE 1, QE 2, TARP, EFSF etc were the same
masters of financial origami who created CDO's, CDS, ABS and MBS.
But let us get back to
the Europeans who are struggling to come to grips with their problem. The reasons for this are fourfold:
·
No one is willing to admit to the true size of the
bad debt problem
·
·
The problem is growing as a result of the unfolding
recession/depression
·
·
Europe is intent with solving the problem with more
debt
·
·
Too many cooks with their spoons in the pot
·
The Europeans are
desperately trying to stave off some cataclysmic domino effect through the
EFSF which is to be geared "several times".
Let me assure you, as
others have done, that this too will fail as it will only at best grant time
and some respite but no cure.
Whilst they are belatedly
recognising the need for the bond holders to take a write-off and even more
belatedly recognising that the write-offs need to be much more than
originally telegraphed, deep down they know that they are destined to fail.
If they want a bazooka,
then let them use the one they have and not the one that they are trying to
borrow into existence.
The seventeen members of
the Eurozone plus the ECB have approximately 11,000 tonnes of gold in their
vaults. At the current price of 1240 Euros per oz, the value comes to
approximately 400 billion euros which is almost the size of the original version
of the EFSF.
Of course there are
several ways that gold could be enlisted in creating an EFSF with true equity
and fire power, rather than debt which leaves it susceptible to further
attack. Whether they use it as security to borrow or as backing to print is
another issue.
The beauty of harnessing
the gold in their vaults, is that such a move would
release the price of gold from the shackles of manipulation and give it its
rightful place as money par excellence.
If this were to happen,
the value of the gold in the EFSF would perhaps double (or triple?) and thus
give the EFSF even more brute force to stave off insolvency amongst member
states and banks.
Perhaps those investors,
large and small, who have held their gold will be
enticed to sell their holdings to government at the new higher price. This
will give the governments' gold holdings another boost and the taxes
collected from the profit on the sale of gold by investors will also provide
a one off revenue stream to them.
I acknowledge that there
will be money printing involved but at least it is not going to form part of
the interest accumulating national debt as has been the case with all other
money printing attempts to date. Moreover, the cash in the hands of gold
sellers might then be ploughed into the productive resuscitation of the
economy.
The above is just a trial
balloon that perhaps needs much embellishment and careful thought so that it
does not fail due to inadequate planning.
Perhaps I am too naive,
but it is my belief that government debt and bank capital backed by gold
provides the world with a uniform capital base that does not suffer from such
problems as mark to market and other accounting manipulations. It will also
limit the growth of debt which feeds the banking squid. Perhaps I am even
more foolish to believe that silver coins will once again ring in our ears as
they exchange hands on a daily basis.
Will Europe embrace any
such semblance of a plan using its gold? I highly doubt it. They know deep
down that they will fail and are holding on to their gold as THE back up plan
for the day after the world's financial system implodes.
Its leadership is
simultaneously guided and threatened by the same group of people - the
bankers as well as the ex-bankers who now infest the bureaucracy of the
Eurozone, the IMF, the ECB, the various other institutions, as well as the
lobby groups. My greetings to Mr Draghi who now heads the ECB and who is an
ex-Goldman Sachs International managing director. I'm sorry. Did I say ex?
James Quinn in an article
some time ago had this to say:
Almost 30% of our economy
was based upon producing things the rest of the world wanted to buy. Another
12% of GDP was from productive functions of agriculture and mining.
.....finance and professional services accounted for only 14% of the economy.
Today manufacturing accounts for 11% of the economy, while finance and
professional services account for 33% of the economy."
The bottom line is that
once upon a not so distant time, the finance and professional service sector
took 14c of every dollar of GDP to MANAGE the production and wealth generated
by the economy, whereas today they take 33c of every dollar to MASSAGE the
wealth out of your pocket whilst pretending to respectfully wipe the sweat
off your brow. This sector is now siphoning off an additional 20c off every
dollar you earn. Think about that.
As a result of those nice
people MASSAGING your wealth, your stock market portfolios, your pension
plans and retirement funds resemble cadavers on life support.
You doubt me? Well as
Josh Rauh recently wrote:
"Using June 2009
data, Robert Novy-Marx and I measured a $3.1 trillion gap in state and local
pension systems, arising from $2.3 trillion in assets and $5.4 trillion in
liabilities."
If that wasn't enough,
Harry Markopolos (who nailed Madoff well before the due date) recently also
uncovered more bank massaging. Perhaps Markopolos' own words should be
quoted:
"Every time a state
pension fund tried to sell a currency they would assign them a price at the
lows of the day and the bank would pocket the difference. The bank has done
this for not years, but for decades, every business day for decades. This
bank didn't learn to steal just ten years ago,
they've been doing it for many decades. "
The result? Once again in
the words of Harry Markopolos:
"Between Bank of New
York Mellon and State Street, these two institutions have stolen between $6 to $10 billion from tens of millions of Americans'
retirement savings accounts. It's been a hell of a crime spree for the
banks...."
To top it all off, the
ultimate manipulation has been by Messrs Greenspan and Bernanke who have
dumbed down interest rates, thus destroying pricing mechanisms, pension plans
and any claim to currency being a store of value with the effect of guiding
desperate investors into the arms of dangerous alternatives.
The financial and moral
imperative for Europeans and Americans to own gold and silver has never been
stronger. The Chinese, the Indians and other "third world" people
have not needed to wake up to this imperative. They simply have never
abandoned history and its lessons.
In short, my advice to
you is to maintain a third world attitude when dealing with first rate
crooks.
My advice to Europe's
politicians is to threaten the bankers with expensive and protracted court
proceedings culminating in jail. The process of penitence is always greatly
aided by visions of hell.
The bottom line: We are
dreaming a distant reality if we think that the bankers' power will be
curtailed and that gold and silver will replenish the system any time soon.
The bankers own the world and we are simply the insignificant coins that are
drawn down the drain that lies behind the coin slot of their money making
machine. Any reduction or destruction of debt is a mechanism for restoring liberty
to people's lives and is pure anathema to bankers.
So which will you go for?
The assurances of man-made fiat photocopiers operated by crooks and
incompetents or the insurance of God-given gold and silver extracted
by an honest day's work?
In the meantime, will
Europe put her gold where her mouth is? Not a chance.
Peter
Souleles
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