Uh Oh ...

Normally I agree with Dave Ramsey, at least at a personal economic level. It is good not to be in debt. And I even agree with him on another idea he spoke of today, but not for the same reason. I do not recommend to my friends to buy gold. My reason is that one does not make all that many $1000 (now $1300) purchases. Gold isn't an investment. It is a parking place. As is silver, which I do own and recommend. $20 increments. Dave Ramsey is worried about a gold "bubble", the price being unreasonably high and going down later. In what? Dollars? Unlike shrimp, lettuce, and even corn, silver and gold stay the same. An ounce of silver is worth an ounce of silver. No more. No less.The ounce of silver that I got for a dollar in 1964 is still worth ... an ounce of silver. The Federal Reserve Note I left in an old coat pocket and found recently now buys about 4% of what it would in 1964. That is the point. Dave Ramsey made a point about the Petroleum bubble last Summer when sweet crude went to $145 a barrel and gasoline was "$5 a gallon", and how that was a bubble too. But he missed the point: it wasn't petroleum nor gold that is the bubble. The dollar is the bubble, and a heavy one at that. When gasoline was $4.50 a gallon here, my ounce of silver bought four gallons of gasoline just like it did in 1964 when gasoline was 25¢ a gallon.

Right now, Mr. Ramsey, gold is at a record high, and silver is as high as it has been since the Hunt Brothers tried to corner the market many years ago. But, this is merely a symptom. The following is a commodity news clip from Friday October 9, 2010 from Brock Associates, a commodities broker to his clients:

Corn, soybean and wheat futures at the Chicago Board of Trade will all have expanded daily price limits on Monday as a result of Friday's sharp gains.
The daily price limit on corn futures will be expanded to 45 cents per bushel from the normal level of 30 cents.¹
...
Price limits will also expand on Monday for CBOT soymeal, soyoil and oats futures. For soymeal, the price limit widens to $30 a ton, from $20.

Straightforward working information that CNN, CBS, ABC, NBC and MSNBC, and even FOX didn't find important enough to mention even though it is a suspension of rules designed to control runaway panic selling and buying. Couple that with this information from today's Economic Policy Journal:

Corn prices have hit a two-year high in early morning trading, jumping more than 8 per cent.
CBOT December corn surged by an expanded daily limit of 45 cents, or 8.5 per cent, to $5.73¼ per bushel, the highest since September 2008. In the last two trading sessions, corn is up more than 15%.

Now, remember that little decal on your gas pump last time you bought gas - "may contain 10% ethanol". Ethanol, alcohol made from corn by Archer Daniels Midland in Clinton Iowa. They are competing with you for the food you eat and the feed that feeds the food that you eat.



No, Dave, you don't have to trade in commodities for the price of commodities to reach down and bite you².
Dave, usually I try to live my live in rules you would approve. I have little to no debt (depending on when you ask me. After a trip or after the next month). But I do have some holdings in silver of which you would not approve. They are not an investment. They are an insurance. Just like term insurance on my life, my silver is an insurance against financial calamity. And just like the life insurance, the health insurance, and more obviously, the fire insurance, I hope never to take advantage of it. I don't track its value from day-to-day looking for my opportunity to sell and make a profit. What would I put my safety net in? Dollars? A 401k?
You often advise your listeners to put their savings in a 401k. Do you suppose that the surge in the price of commodities on Friday and Monday might possibly be connected with a recess hearing at the U. S. Senate on Thursday that revived a long dormant plan to nationalize 401k and other tax sheltered savings plans.

Democrats in the Senate on Thursday held a recess hearing covering a taxpayer bailout of union pensions and a plan to seize private 401(k) plans to more "fairly" distribute taxpayer-funded pensions to everyone.
Sen. Tom Harkin (D-Iowa), Chairman of the Health, Education, Labor and Pensions (HELP) Committee heard from hand-picked witnesses advocating the infamous "Guaranteed Retirement Account" (GRA) authored by Theresa Guilarducci.
...
In a nutshell, under the GRA system government would seize private 401(k) accounts, setting up an additional 5% mandatory payroll tax to dole out a "fair" pension to everyone using that confiscated money coupled with the mandated contributions.³

Which 2000 page lame-duck omnibus bill will this be hidden in? Between theft like this and the regulations-and-debt coming out of Washington, is there any wonder that people are afraid of the future of the dollar?



¹ What this means is that there are no sellers willing to sell at the mandated price high limit. So far, people can not be forced to sell at a loss. Stay tuned.
² Gold here may diverge from the other commodities as it is a hedge against currency variation only, i.e. it does not get traded like all the other commodities primarily as a regulator of supply against future commercial demand - even silver is an industrial metal and traded that way as its primary purpose. Speculation and arbitrage are parasitic riders on the primary purpose of commodity trading; even if, sometimes the tail wags the dog.
³ http://www.humanevents.com/article.php?id=39336

Let Me See If I Understand This ...

April 9 (Bloomberg) -- China’s finance ministry failed to draw enough demand at sales of 273-day and 91-day treasury bills today after the central bank tightened control on money supply to restrain inflation, according to traders at two banks.

Ok, the Chinese are buying our Treasury Bills (think bonds) so that our Politicians have money to buy votes with so that they can stay in Washington, party, makes rules for us to follow that they don't, get a lot richer than their salaries would suggest, and our children and grandchildren will pay back or suffer from the defaulting on; and the Chinese in turn are supporting this with debt (think bonds) that their children in turn will have to pay. But you have to wonder, who are the Chinese selling their T-Bills to?

Charles Ponzi ... Bernie Madoff ... You guys were just pikers, just a drop in the bucket to the U. S. Government.

Why do creditors continue loaning to the fedgov?

[From a comment I left on Tuscany Circle blog]

Kind of simple actually. The creditors have more to lose than gain in the collapse. The creditors, mainly China, have a huge stake in American debt. Like any other bankruptcy, the creditors lose too. So the creditors must get out without causing a stampede that wipes their position out. There are several ways really. One they can reduce what they loan and extract tighter concessions on the loan. The Chinese have reduced the term of their treasuries purchase from 30 year notes to seven year notes and interest is up. Second, they can increase their imports and pay for them with US Dollars reducing their cash holdings. Note that this does not have to be with us, it can be any other country, and can be at a discount off par value - that is they can pay generous prices to keep up the illusion. This spending can be petroleum, land, food, or virtually anything. It could be the Panama Canal. Oh wait, they've done that.

Or they could surreptitiously dump the money so as not to start a panic that would render their dollar holdings worthless just like yours will be when the government goes default. Several weeks ago, $134B in bearer bonds were caught being smuggled through Italy by two "Japanese" men. The story died a quiet death. The news didn't find it an interesting story. The US Government declined comment. It meant nothing. Someone is exiting holding our money in favor of G. Gordon Liddy and Gold. They just don't want anyone else to know about it. Only one problem with all this. It is a game of musical chairs. Someone (many?) will be left standing when the music stops. But you don't want it to collapse until you are clear of the carnage.

Omerta

The Velocity of Money

Cash goes round and round
based on a post by Sabine McNeill

It is August. In a small town on the Florida panhandle, holiday season is in full swing, but it is raining so there is not too much business happening. Everyone is heavily in debt. Luckily, a rich English tourist arrives in the foyer of the small local hotel. He asks for a room and puts a one hundred dollar Federal Reserve note on the reception counter, takes a key and goes to inspect the room located up the stairs on the third floor.

The hotel owner takes the banknote in a hurry and rushes to his meat supplier to whom he owes $100.

The butcher takes the money and races to his supplier to pay his debt.

The wholesaler rushes to the farmer to pay $100 for pigs he purchased some time ago.

The farmer triumphantly gives the $100 note to a local prostitute who gave him her services on credit. (Bear with me, It's just a parable)

The prostitute goes quickly to Mr. Patel, the hotel manager, to whom she owed $100 for the use of a room to entertain "clients".

At that moment, the rich Englishman is coming down to reception and informs the hotel owner that the proposed room is unsatisfactory, takes back his $100 bill, and departs. There was no profit or income, but everyone no longer has any debt, and the small townspeople look optimistically towards their future.

And the moral of the story?
Cash is ‘real’. An IOU is TRUST.

The Silver Warcry!

It is not enough that the big financial houses and their accomplices in Congress have misappropriated the present and future wealth of this country to prolong the eventual collapse of the Ponzi scheme we call the Federal Reserve Note.



There is literally no end to the banker's desire to have it all. Even though we have been off the Silver Standard backing currency for 45 years last month, many banks still have listed assets of silver as their collateral backing their solvency. But, as with all deposits, there is no profit in merely having them sit around gathering dust. The banques majeur have leased out, sold short, or sold on futures those silver assets. The banks list their physically present silver concurrently with their receipt silver. This is why the price of tangible silver is at a premium over paper silver. At some point in the near future, the banks will have to exercise the fungibility of silver to cover the absence of the real metal. As long as they declare the spot price of silver to be low, this will be the rate at which they buy silver. Good luck on you buying at that rate also.



Sincere thanks to John at Stellaconcepts for permitting the use of his video.

The Fed - Lender of Last Resort. Are We Really There Already?

Today the Federal Reserve Bank began buying Treasury Bills to underwrite the currency of the United States. Since the Fed is also the one who circulates the debt funded currency, what we really have here is paying for our National Mastercard with our National Visa card.

It really reminds me of the old Cheech and Chong movie where one of them was going to make some money selling pot. He had done very well ... selling it, on credit, to himself.

Fractional Reserve

Our old money was honest. It said what it was, and what it meant. Gold and Silver certificates were like a receipt for a certain amount of "money" on deposit. Even the Government knew which of the look-alike bills seen in As Constant As the Dollar were which.



This one was from our "National Currency", our first Federal Reserve Notes. The banks would honor them for most purposes -- buying a loaf of bread, paying a salary, ordinary trade. What they were not good for was paying taxes or debts to the Government. In that case, only real money "lawful money" would do.

Both types of money circulated, but unlike the fiat currency of today, this fiat currency was kept at a strict ratio with the hard currencies of the time. It provided the liquidity necessary for commerce without diluting the value of the dollar.

Today's currency on the other hand is entirely fiat and is issued by the Governor and researchers of the Federal Reserve Bank based upon the perceived need for liquidity of the current economy. This is a tap-dance on a high-wire. Where anything can trip it up.

Now the currency is backed by our debt, by our willingness to pay in the future for the dollar of today. The baby-boomers are seeing retirement close in on them and are following the (correct) advice of Dave Ramsey and reducing their personal debt. With the intricacies of fractional currency, this reduces the debt backing and hence the dollars in circulation. This is compounded by the increase in loans to members of our society who do not have the ability nor intention to repay or ever carry their own weight. A crash not only was inevitable, it still is, for we aren't even there yet.

Issue an extra 800 billion and see what happens.