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ttp://www.sec.gov/Archives/edgar/data/1387054/000102317509000251/tmjune30200910qedgarversiont.htm
The later commentary on Don Ramon is particularly helpful.
The worst should be hindmost.Now it is waiting on finishing the mill et cetera and the fine tuning of the equipment as we gear for production.
We have not employed procduction staff yet so patience is still required.Can we be producing by December 2009?
Mamona,how can you be right and so wrong simultaneously ?
Indirectly of course,you realize something is seriously wrong in the USA.The demize of the USA goes back to 1913,but you forget about Jekyl Island,when off on a torrent of abuse.
Oddly,the essense of your point,is totally correct.
"You are more of a serf than I am; all Americans have to do is get rid of Obama, the marxist punk; restore capitalism, and everything will be fine. Meanwhile, you're still a socialist in serfdom."
I fully agree to all of that fine,thoughtful paragraph.Yes,restore capitalism.But look at the behaviour of this and the previous Bush administration and tell me that they were concerned with capitalism ?
Check out this website.
Better still,just check out the FEMA legislation.
Such a pity some cannot be bothered doing a little homework.
Being emotional and foul mouthed tends to strongly indicate education and personality.
Thomas Jefferson is my hero and the great document is the USA Constitution.A document ex President Bush called a piece of paper and treated as a mere piece of paper.
Read Ty Andros's latest post.
http://www.traderview.com/tedbits/tedbits-Aug06-09.pdf
Welcome to being a 21 st century serf,totally under the control of the masters who created the situation,profited from it and pay no tax.
Am I going too far?No,check what Bush did to the USA Constitution.THEY have the right to confiscate all property,to direct all as to where they live and what work they do.FACTS.
Lets engage in thinking.
What exactly is good?
Why is each of those good things good?
Why will it take a couple of years to come right?
May it not take 5 or 10 years ?
If the views in my posted article are a surprize,where have you been?
Since early 2003 to my knowledge,Richebacher,Maund,Willie, Casey and many others have warned of today,and that which is still to come.(Check out Celente too)That is why most of these writers advocate gold and maybe silver.Casey ,Maund, Willie,along with the likes of Bonner and Addington,live delberately outside the USA.They have been trying to help others prepare and save their assets bases.
A number of gold bugs see a serious gold break out soon,including Bob Hoye.
Production coing to DR should be great for us,cashflow.DR has silver,Centenario appears rich in gold,TRGD may provide some protection against tomorrow.(But first hopefully we get our initial loot back,individually.)
I would make this comment:this is not economy to be casual toward.Study now could prove crucial tomorrow.
The Dark Years are here
by Egon von Greyerz – Matterhorn Asset Management
In this newsletter we will outline what is likely to be the devastating effect of the credit bubbles, government money printing and of the disastrous actions that governments are taking. Starting in the next 6 months and culminating in 2011-12 the world will experience a series of tumultuous events which will be life changing for most people in the world. But 2011-12 will not be the beginning of an upturn in the world economy but instead the start of a long period of economic, political and social upheaval that could last for a couple of decades.
We will discuss the three areas that we for some time have argued will determine the fate of the world for the foreseeable future, namely the coming unemployment explosion, the next and much more serious phase in the credit markets and finally the likely hyperinflationary or just inflationary effect this will have on the world economy and investments.
EMPIRES ARE BUILT ON THEFT PILLAGE, SLAVE LABOUR AND FINALLY MONEY PRINTING
Let us first go back in history and analyse what creates an empire and the prosperity that comes with it.
The British Empire started in the 17th century and reached its peak in the 19th century during Queen Victoria’s reign. By the end of the 19th century The British Empire included nearly 20% of the land surface of the world and 25% of the world’s population. So Britain which is less than 0.5% of the world’s land surface area controlled an empire which was more than 50 times greater. So by using slave labour and by stealing the resources of 20% of the world, it is no wonder that Britain was the wealthiest nation for several centuries. But like all empires, Britain carried the seeds of its own destruction. All empires – e.g. Mongolian, Roman, Ottoman or British etc. – eventually overstretch their resources both militarily and financially. This combined with decadence and illusions of grandeur eventually leads to the collapse of an empire.
The US empire was slightly different from the point of view that it never conquered the world although the US was itself a colony conquered from its original inhabitants. But the US has intervened in many areas (e.g. Korea, Vietnam, Afghanistan, Iraq etc.). Also, there are US military bases in 120 countries. Initially the US was an economic superpower based on an entrepreneurial spirit and a very strong production machine backed by fierce military power. But after the Vietnam war the US had overstretched its resources and by 1971 Richard Nixon abolished the gold standard in order to be able to start money printing in earnest. The money printing phase is normally the last stage of an empire before it collapses and this is where the US is now. The US dollar became the reserve currency of the world when the US was strong economically. But as the US economy started to weaken in the 1960-70’s the US government found a much better method for maintaining a strong economy. It started to print paper that it sold to other nations or exchanged for goods and services. For almost 50 years this has been the most clever way ever devised of maintaining the living standards of an economically deteriorating nation without even having to spend any resources on building an empire. It is a Ponzi scheme which has worked for several decades but slowly the world is now waking up to the fact that they are holding worthless paper printed by the US Government. (We realise this is a much simplified version of empire building and destruction but it is nevertheless an accurate analysis).
THE US GOVERNMENT IS IN DENIAL
The US is haemorrhaging financially and economically. It has lent or committed almost $13 trillion in the last 18 months to prop up the financial system. The estimated government deficit in the current year is almost $2 trillion or 50% of the budget. All the money committed so far has only achieved two things: Firstly it has created some short term hope which together with totally illusionary sightings of green shoots have generated a small stock market correction (which we forecast in our January Newsletter) and some belief that the crisis is ending. Secondly, all the funds printed so far to save the system have gone to Wall Street but has done nothing whatsoever for the real economy. Every single sector of the real economy is deteriorating whether it is production, unemployment, corporate profits, real estate, credit defaults, construction, federal deficits, local government and state deficits etc.
And what is the government doing about it. They are doing the only thing they know which is to print more money.
This is total lunacy! How can any intelligent person believe that printed pieces of paper can solve an economic catastrophe?
If that were the case we could all go home and write out pieces of paper or use Monopoly money to spend in the shops or repay our debts.
How can the US government, the UK government and most other governments not understand that the only way to run an economy is to cut your coat according to your cloth. This is why the emperor had no clothes because the country had run out of gold thread to make the cloth. Until now the US as well as other countries have been able to buy the cloth because the world has been foolish enough to accept worthless pieces of paper as payment. But this is coming to an end very soon and many countries will be without both coats and cloth.
What governments are doing with people’s money is to totally destroy its value. Purchasing power in the US and many other countries has declined more than 95% in the last 100 years. While it might buy votes short term it will only generate massive misery long term. And this is what many countries are starting to experience now. But sadly it will get a lot worse. We are still only in the first phase of this tragic saga. The second phase is likely to start in the next 6 months.
THE US HAS 100 MILLION AFFECTED BY UNEMPLOYMENT
The real unemployment in the US is 20% or 30 million. These are the real unadjusted figures calculated on the same basis as the official figures before the method of the calculation was changed in the 1990’s. Reported government figures, especially in the US, are continually manipulated in order to suit the political aims of the government. Therefore, one should not give any credence to the published figures. Most governments mislead the people most of the time.
With 20% unemployment in the US we are already approaching the levels in the 1930’s when peak total unemployment reached 25%. The 20% current level is the non-farm unemployed and is still a lot lower than the non-farm peak figure in the 1930’s which was 35% unemployed.
Since we are still in the early stages of this crisis, it is our firm opinion that non-farm unemployment levels will reach 35% at least in the US in the next few years.
But even the current figure of 30 million unemployed is a catastrophe. Adding dependants to every unemployed person there are currently 100 million people affected by unemployment in the US. In the next three months 3 million unemployed will fall out of the social security safety-net. These are the people who were laid off in the second half of 2008. Including their families this means that around 10 million people will become destitute between now and September with no social security and no savings. If we then add the 4 million that were made redundant in the first half of 2009 that will result in an additional 13 million people including families will become destitute around Christmas. This is a disaster of unimaginable consequences that will affect the whole fabric of American society.
The consequences will be social, political, financial and the effects on the US economy will be of a magnitude which is substantially greater than during the Depression of the 1930’s. We must remember that none of the problems in the financial system have been resolved but only put on a very temporary hold. The rise in unemployment combined with the reduction in consumption will lead to the next and much more severe banking crisis.
Unemployment in Europe is also rising fast and shows no signs of abatement. Many countries are reaching 10% with for example Spain at 19% and Latvia at 16%. But as we have said for quite some time, of the larger European nations, the country with the biggest problems is the UK. Unemployment in the UK is currently “only” 2.5 million or 7% but it is estimated to reach over 3 million by the end of 2009. The combination of government deficits, a banking system which is extremely fragile and too big for the country, very high personal credit that will not be repaid and a housing bubble which still has a long way to fall makes the UK very vulnerable to a major financial shock.
During the next 6-9 months unemployment will severely affect most parts of the world including China, Asia and Africa. Never before has there been a global unemployment crisis affecting the world simultaneously. This will not only mean a massive decline in consumption and world trade leading to a recession or depression worldwide but also poverty, famine and social unrest.
THE BANKERS ARE STILL RUNNING THE SHOW
The masters of the financial circus are the bankers. Not only did they reap the benefits from manufacturing toxic financial products to the extent of receiving bonuses and stocks in the $trillions during the last 15-20 years. But they are also the only beneficiaries of the trillions of dollars that have been printed by governments to rescue the financial system. Why are the bankers benefiting from the rescue of their own banks? Because they are the ones controlling the government, advising the government and making major contributions to the politicians.
Bonuses are back
Yes, many banks are paying higher bonuses in 2009 than 2008. Goldman Sachs is on course to pay bonuses of $20 billion or $700,00 per employee and Morgan Stanley a 30% increase from average per employee of $262,000 last year to $340,000 this year. JP Morgan’s bonus pool for the first quarter of 2009 is up 175% to $3.3 billion and the new chief executive of RBS, the nationalised UK bank is getting an incentive package worth £10 million! Similar bonuses are being paid by many other banks. Barclays Capital for example is on a massive spending spree recruiting executives with golden hellos and guaranteed bonuses of millions per employee.
Central banks and governments worldwide have spent trillions of dollars temporarily propping up a totally bankrupt financial system and now a few months later the bankers are back earning absurd money within a banking system which hasn’t been mended and is still bankrupt. This is scandalous.
Toxic Structures are back
But not only that, they are also back to creating new securitisation programmes in order to reduce capital requirements and increase leverage. Goldman Sachs, and Barclays Capital are doing this already and many other banks will follow. It is exactly these types of programmes that created the financial crisis in the first place and now the bankers are back at it again. This is totally disgraceful and irresponsible behaviour by bankers who have learnt nothing from their disastrous freewheeling actions except how to milk the system to the maximum again.
As we have pointed out before, none of the problems in the banking system have been resolved. The system still has a leverage of 25-50 times, it is still full of toxic debt and derivatives, loan books are deteriorating daily, it still has worthless paper assets valued at fantasy prices and most banks are run by the same bankers who created the problems in the first place. For a typical bank, a 4% drop in asset value wipes out the equity. This is what we call a recipe for disaster.
In the meantime governments are making feeble attempts at preventing a future crisis by planning new regulations. But these regulations will only deal with known and historic problems. The bankers will again run rings around the authorities in creating new structures to circumvent the new rules.
ACCELERATION OF THE DOWNTURN IS ABOUT TO START
The next phase of this tragic saga will soon start.
Compared to the of the 1930’s we are already in a worse position today than at the same stage of the Great Depression. Industrial production is worse in many countries. World trade is worse and the stock market fall is greater than at the same stage in the corresponding period of the Depression and both government and private debt is a lot worse.
So what is likely to happen next?
» Unemployment will increase government deficits
First unemployment will rise substantially as outlined above and the effects of the unemployed masses will have major repercussions on the economy. This will lead to government deficits growing substantially. Tax revenue is already falling at alarming rates in the US and UK and most other countries but it will get a lot worse. Government expenditure will rise rapidly due to the mass unemployment. Taxes will rise but this will be like getting water out of a stone – there won’t be much revenue to tax. And if Vat or sales taxes are increased this will kill consumption even more. In addition governments will have to implement more programmes to help the poor, hungry and homeless. This will lead to more money printing.
» Next phase of bank problems
Secondly the next phase of problems in the financial system will start by the autumn of 2009 at the latest. Since this will come as a total shock to everyone the effect will be much worse than in 2008. So far US banks have taken losses of $1.1 trillion. Conservative estimates put total losses at $2.2 trillion but realistic estimates are around $4 trillion and this excludes any problems in the $600 trillion to $1 quadrillion derivatives market a big part of which is worthless. In the next round of capital raising for banks there will only be one investor – the government. Thus there will be more money printing.
» Government paper will collapse – first in the US and UK
With the escalation of money printing markets will be flooded with government paper which nobody wants, leaving governments to buy its own junk. The two countries with the worst problems are the UK and the US and their precarious situation will emerge first. Within the next few months rating agencies are likely to downgrade both countries’ debt. This will lead to the value of the treasury bonds and gilts collapsing and interest rates quickly moving up into the teens. The higher rates will make the financing costs of the debt to up exponentially leading to more money printing and higher interest rates. This is the “perfect” vicious circle that will end in a hyperinflationary depression.
» Hyperinflation is a currency driven event
For many years we have been saying that this crisis will by hyperinflationary. The issuing of unlimited government paper will lead to the rest of the world selling their holdings of US/UK treasuries as well as selling the dollar and the pound. Most so called financial experts have been predicting a deflationary recession/depression since they don’t see the demand pull that they think is the cause of hyperinflation. We have been one of the very few (together with the very wise Jim Sinclair) to understand that hyperinflation is a currency driven event. The issuing of unlimited government paper outlined above will lead to the US dollar as well as the pound collapsing. It is the collapse of the currency which leads to hyperinflation. Without fail in history every hyperinflationary event has been caused by a collapsing currency not by demand pull.
Many other nations will also experience hyperinflation such as the Baltic States, certain Eastern European and Asian Countries. Many more countries will have high inflation.
THE DARK YEARS
In the next few months we will see the start of the Dark Years. For the first time in the history of the world there will be a synchronised downturn affecting all nations (although some a lot worse than others).This is the culmination of the world and especially the Western world, living above its means for decades in a mania of credit bubbles, asset bubbles, real estate bubbles as well as excesses leading to decadence and a society with very weak moral and ethical values. (Of course no society recognises this as it is happening but only afterwards). Governments have fuelled this process by printing unlimited amounts of paper thus destroying the money and purchasing power of most nations.
The Dark Years will be extremely severe for most countries both financially and socially. In many countries in the Western world there will be a severe depression and it will be the end of the welfare state. Most private and state pension schemes are also likely to collapse. It will be a worldwide depression but some countries may only have a deep recession. There will be famine, homelessness and misery resulting in social as well as political unrest. Different type of government leaders and regimes are likely to result from this.
How long will the Dark Years last? There is a book called ”The Fourth Turning” written by Neil Howe. He has identified a pattern that repeats itself every 80 years. The pattern has been extremely accurate in the Anglophile world. We have recently entered the Fourth Turning which is the final 20 years of the cycle. According to Howe we are in the early stages of a 20 year period of economic and institutional upheaval. This is a period of Crisis when the fabric of society will change dramatically. Previous Fourth Turnings have been the American Revolution, Great Depression and World War II. According to Howe the Crisis will be substantially worse before it is over and it will last for another circa 20 years.
All of this is not good news and we hope that we and Howe are wrong regarding the severity and length of this crisis. But we fear that we are both right. We must stress again that never previously has the the whole world entered a downturn simultaneously in such a fragile state both financially and economically which is why the Dark Years are likely to be so devastating and long lasting.
FINANCIAL MARKETS
Stockmarkets
The correction up in stockmarkets has probably finished but there is a possibility that it will continue for another couple of months. What is important is that it is a correction (we predicted it already back in January) and it will soon lead to a strong resumption of the downtrend. In the Dow Jones, a break of the trend line at 6400 would lead to a projected decline of at least 90% from the top. Almost all major world markets point to similar declines. This sounds incredible but bearing in mind that the Dow Jones fell 90% in the 1930’s and bearing in mind our discussion in the Dark Years paragraph above, this kind of target is not impossible.
Some commodity stocks as well as gold and silver mining shares will be major beneficiaries from the Crisis.
Bonds
We forecast at the beginning of the year that US long rates would go up and they have almost doubled since. But this is only the beginning since we expect US and UK long rates to reach at least the mid teens in the next 2-3 years. Interest rates in all countries will go up substantially in the next few years.
Currencies
The dollar and the pound will have very substantial falls in the autumn of 2009. At some later stage the Euro will also weaken as a result of certain countries breaking away from the Euro area.
Gold
The currency which will be the major beneficiary from the Crisis is Gold. We have invested in gold since 2002 when we saw the Crisis coming. Gold has trebled since then. But this is just the beginning. The next major move will take place in the coming 4-5 months and it will be major. Gold for wealth preservation purposes should be held directly by the investor and stored outside the banking system in his name. Holding gold in ETF form, futures or owning part of gold bars that you don’t have personal access to is not wealth preservation.
There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
Ludwig von Mises
When PZG was just San Miguel,one could try to guesstimate value and value potential.
Now with 2 major land acquisitions,what have we?
Lots of land of very indeterminate value.
A large land bank is one thing but without some serious drilling results and assays,I cannot see anyone interested in taking over PZG.We do have the quality geologists to reconnoitre the properties but then it starts getting very expensive fast.
The Dark Years are here
by Egon von Greyerz – Matterhorn Asset Management
In this newsletter we will outline what is likely to be the devastating effect of the credit bubbles, government money printing and of the disastrous actions that governments are taking. Starting in the next 6 months and culminating in 2011-12 the world will experience a series of tumultuous events which will be life changing for most people in the world. But 2011-12 will not be the beginning of an upturn in the world economy but instead the start of a long period of economic, political and social upheaval that could last for a couple of decades.
We will discuss the three areas that we for some time have argued will determine the fate of the world for the foreseeable future, namely the coming unemployment explosion, the next and much more serious phase in the credit markets and finally the likely hyperinflationary or just inflationary effect this will have on the world economy and investments.
EMPIRES ARE BUILT ON THEFT PILLAGE, SLAVE LABOUR AND FINALLY MONEY PRINTING
Let us first go back in history and analyse what creates an empire and the prosperity that comes with it.
The British Empire started in the 17th century and reached its peak in the 19th century during Queen Victoria’s reign. By the end of the 19th century The British Empire included nearly 20% of the land surface of the world and 25% of the world’s population. So Britain which is less than 0.5% of the world’s land surface area controlled an empire which was more than 50 times greater. So by using slave labour and by stealing the resources of 20% of the world, it is no wonder that Britain was the wealthiest nation for several centuries. But like all empires, Britain carried the seeds of its own destruction. All empires – e.g. Mongolian, Roman, Ottoman or British etc. – eventually overstretch their resources both militarily and financially. This combined with decadence and illusions of grandeur eventually leads to the collapse of an empire.
The US empire was slightly different from the point of view that it never conquered the world although the US was itself a colony conquered from its original inhabitants. But the US has intervened in many areas (e.g. Korea, Vietnam, Afghanistan, Iraq etc.). Also, there are US military bases in 120 countries. Initially the US was an economic superpower based on an entrepreneurial spirit and a very strong production machine backed by fierce military power. But after the Vietnam war the US had overstretched its resources and by 1971 Richard Nixon abolished the gold standard in order to be able to start money printing in earnest. The money printing phase is normally the last stage of an empire before it collapses and this is where the US is now. The US dollar became the reserve currency of the world when the US was strong economically. But as the US economy started to weaken in the 1960-70’s the US government found a much better method for maintaining a strong economy. It started to print paper that it sold to other nations or exchanged for goods and services. For almost 50 years this has been the most clever way ever devised of maintaining the living standards of an economically deteriorating nation without even having to spend any resources on building an empire. It is a Ponzi scheme which has worked for several decades but slowly the world is now waking up to the fact that they are holding worthless paper printed by the US Government. (We realise this is a much simplified version of empire building and destruction but it is nevertheless an accurate analysis).
THE US GOVERNMENT IS IN DENIAL
The US is haemorrhaging financially and economically. It has lent or committed almost $13 trillion in the last 18 months to prop up the financial system. The estimated government deficit in the current year is almost $2 trillion or 50% of the budget. All the money committed so far has only achieved two things: Firstly it has created some short term hope which together with totally illusionary sightings of green shoots have generated a small stock market correction (which we forecast in our January Newsletter) and some belief that the crisis is ending. Secondly, all the funds printed so far to save the system have gone to Wall Street but has done nothing whatsoever for the real economy. Every single sector of the real economy is deteriorating whether it is production, unemployment, corporate profits, real estate, credit defaults, construction, federal deficits, local government and state deficits etc.
And what is the government doing about it. They are doing the only thing they know which is to print more money.
This is total lunacy! How can any intelligent person believe that printed pieces of paper can solve an economic catastrophe?
If that were the case we could all go home and write out pieces of paper or use Monopoly money to spend in the shops or repay our debts.
How can the US government, the UK government and most other governments not understand that the only way to run an economy is to cut your coat according to your cloth. This is why the emperor had no clothes because the country had run out of gold thread to make the cloth. Until now the US as well as other countries have been able to buy the cloth because the world has been foolish enough to accept worthless pieces of paper as payment. But this is coming to an end very soon and many countries will be without both coats and cloth.
What governments are doing with people’s money is to totally destroy its value. Purchasing power in the US and many other countries has declined more than 95% in the last 100 years. While it might buy votes short term it will only generate massive misery long term. And this is what many countries are starting to experience now. But sadly it will get a lot worse. We are still only in the first phase of this tragic saga. The second phase is likely to start in the next 6 months.
THE US HAS 100 MILLION AFFECTED BY UNEMPLOYMENT
The real unemployment in the US is 20% or 30 million. These are the real unadjusted figures calculated on the same basis as the official figures before the method of the calculation was changed in the 1990’s. Reported government figures, especially in the US, are continually manipulated in order to suit the political aims of the government. Therefore, one should not give any credence to the published figures. Most governments mislead the people most of the time.
With 20% unemployment in the US we are already approaching the levels in the 1930’s when peak total unemployment reached 25%. The 20% current level is the non-farm unemployed and is still a lot lower than the non-farm peak figure in the 1930’s which was 35% unemployed.
Since we are still in the early stages of this crisis, it is our firm opinion that non-farm unemployment levels will reach 35% at least in the US in the next few years.
But even the current figure of 30 million unemployed is a catastrophe. Adding dependants to every unemployed person there are currently 100 million people affected by unemployment in the US. In the next three months 3 million unemployed will fall out of the social security safety-net. These are the people who were laid off in the second half of 2008. Including their families this means that around 10 million people will become destitute between now and September with no social security and no savings. If we then add the 4 million that were made redundant in the first half of 2009 that will result in an additional 13 million people including families will become destitute around Christmas. This is a disaster of unimaginable consequences that will affect the whole fabric of American society.
The consequences will be social, political, financial and the effects on the US economy will be of a magnitude which is substantially greater than during the Depression of the 1930’s. We must remember that none of the problems in the financial system have been resolved but only put on a very temporary hold. The rise in unemployment combined with the reduction in consumption will lead to the next and much more severe banking crisis.
Unemployment in Europe is also rising fast and shows no signs of abatement. Many countries are reaching 10% with for example Spain at 19% and Latvia at 16%. But as we have said for quite some time, of the larger European nations, the country with the biggest problems is the UK. Unemployment in the UK is currently “only” 2.5 million or 7% but it is estimated to reach over 3 million by the end of 2009. The combination of government deficits, a banking system which is extremely fragile and too big for the country, very high personal credit that will not be repaid and a housing bubble which still has a long way to fall makes the UK very vulnerable to a major financial shock.
During the next 6-9 months unemployment will severely affect most parts of the world including China, Asia and Africa. Never before has there been a global unemployment crisis affecting the world simultaneously. This will not only mean a massive decline in consumption and world trade leading to a recession or depression worldwide but also poverty, famine and social unrest.
THE BANKERS ARE STILL RUNNING THE SHOW
The masters of the financial circus are the bankers. Not only did they reap the benefits from manufacturing toxic financial products to the extent of receiving bonuses and stocks in the $trillions during the last 15-20 years. But they are also the only beneficiaries of the trillions of dollars that have been printed by governments to rescue the financial system. Why are the bankers benefiting from the rescue of their own banks? Because they are the ones controlling the government, advising the government and making major contributions to the politicians.
Bonuses are back
Yes, many banks are paying higher bonuses in 2009 than 2008. Goldman Sachs is on course to pay bonuses of $20 billion or $700,00 per employee and Morgan Stanley a 30% increase from average per employee of $262,000 last year to $340,000 this year. JP Morgan’s bonus pool for the first quarter of 2009 is up 175% to $3.3 billion and the new chief executive of RBS, the nationalised UK bank is getting an incentive package worth £10 million! Similar bonuses are being paid by many other banks. Barclays Capital for example is on a massive spending spree recruiting executives with golden hellos and guaranteed bonuses of millions per employee.
Central banks and governments worldwide have spent trillions of dollars temporarily propping up a totally bankrupt financial system and now a few months later the bankers are back earning absurd money within a banking system which hasn’t been mended and is still bankrupt. This is scandalous.
Toxic Structures are back
But not only that, they are also back to creating new securitisation programmes in order to reduce capital requirements and increase leverage. Goldman Sachs, and Barclays Capital are doing this already and many other banks will follow. It is exactly these types of programmes that created the financial crisis in the first place and now the bankers are back at it again. This is totally disgraceful and irresponsible behaviour by bankers who have learnt nothing from their disastrous freewheeling actions except how to milk the system to the maximum again.
As we have pointed out before, none of the problems in the banking system have been resolved. The system still has a leverage of 25-50 times, it is still full of toxic debt and derivatives, loan books are deteriorating daily, it still has worthless paper assets valued at fantasy prices and most banks are run by the same bankers who created the problems in the first place. For a typical bank, a 4% drop in asset value wipes out the equity. This is what we call a recipe for disaster.
In the meantime governments are making feeble attempts at preventing a future crisis by planning new regulations. But these regulations will only deal with known and historic problems. The bankers will again run rings around the authorities in creating new structures to circumvent the new rules.
ACCELERATION OF THE DOWNTURN IS ABOUT TO START
The next phase of this tragic saga will soon start.
Compared to the of the 1930’s we are already in a worse position today than at the same stage of the Great Depression. Industrial production is worse in many countries. World trade is worse and the stock market fall is greater than at the same stage in the corresponding period of the Depression and both government and private debt is a lot worse.
So what is likely to happen next?
» Unemployment will increase government deficits
First unemployment will rise substantially as outlined above and the effects of the unemployed masses will have major repercussions on the economy. This will lead to government deficits growing substantially. Tax revenue is already falling at alarming rates in the US and UK and most other countries but it will get a lot worse. Government expenditure will rise rapidly due to the mass unemployment. Taxes will rise but this will be like getting water out of a stone – there won’t be much revenue to tax. And if Vat or sales taxes are increased this will kill consumption even more. In addition governments will have to implement more programmes to help the poor, hungry and homeless. This will lead to more money printing.
» Next phase of bank problems
Secondly the next phase of problems in the financial system will start by the autumn of 2009 at the latest. Since this will come as a total shock to everyone the effect will be much worse than in 2008. So far US banks have taken losses of $1.1 trillion. Conservative estimates put total losses at $2.2 trillion but realistic estimates are around $4 trillion and this excludes any problems in the $600 trillion to $1 quadrillion derivatives market a big part of which is worthless. In the next round of capital raising for banks there will only be one investor – the government. Thus there will be more money printing.
» Government paper will collapse – first in the US and UK
With the escalation of money printing markets will be flooded with government paper which nobody wants, leaving governments to buy its own junk. The two countries with the worst problems are the UK and the US and their precarious situation will emerge first. Within the next few months rating agencies are likely to downgrade both countries’ debt. This will lead to the value of the treasury bonds and gilts collapsing and interest rates quickly moving up into the teens. The higher rates will make the financing costs of the debt to up exponentially leading to more money printing and higher interest rates. This is the “perfect” vicious circle that will end in a hyperinflationary depression.
» Hyperinflation is a currency driven event
For many years we have been saying that this crisis will by hyperinflationary. The issuing of unlimited government paper will lead to the rest of the world selling their holdings of US/UK treasuries as well as selling the dollar and the pound. Most so called financial experts have been predicting a deflationary recession/depression since they don’t see the demand pull that they think is the cause of hyperinflation. We have been one of the very few (together with the very wise Jim Sinclair) to understand that hyperinflation is a currency driven event. The issuing of unlimited government paper outlined above will lead to the US dollar as well as the pound collapsing. It is the collapse of the currency which leads to hyperinflation. Without fail in history every hyperinflationary event has been caused by a collapsing currency not by demand pull.
Many other nations will also experience hyperinflation such as the Baltic States, certain Eastern European and Asian Countries. Many more countries will have high inflation.
THE DARK YEARS
In the next few months we will see the start of the Dark Years. For the first time in the history of the world there will be a synchronised downturn affecting all nations (although some a lot worse than others).This is the culmination of the world and especially the Western world, living above its means for decades in a mania of credit bubbles, asset bubbles, real estate bubbles as well as excesses leading to decadence and a society with very weak moral and ethical values. (Of course no society recognises this as it is happening but only afterwards). Governments have fuelled this process by printing unlimited amounts of paper thus destroying the money and purchasing power of most nations.
The Dark Years will be extremely severe for most countries both financially and socially. In many countries in the Western world there will be a severe depression and it will be the end of the welfare state. Most private and state pension schemes are also likely to collapse. It will be a worldwide depression but some countries may only have a deep recession. There will be famine, homelessness and misery resulting in social as well as political unrest. Different type of government leaders and regimes are likely to result from this.
How long will the Dark Years last? There is a book called ”The Fourth Turning” written by Neil Howe. He has identified a pattern that repeats itself every 80 years. The pattern has been extremely accurate in the Anglophile world. We have recently entered the Fourth Turning which is the final 20 years of the cycle. According to Howe we are in the early stages of a 20 year period of economic and institutional upheaval. This is a period of Crisis when the fabric of society will change dramatically. Previous Fourth Turnings have been the American Revolution, Great Depression and World War II. According to Howe the Crisis will be substantially worse before it is over and it will last for another circa 20 years.
All of this is not good news and we hope that we and Howe are wrong regarding the severity and length of this crisis. But we fear that we are both right. We must stress again that never previously has the the whole world entered a downturn simultaneously in such a fragile state both financially and economically which is why the Dark Years are likely to be so devastating and long lasting.
FINANCIAL MARKETS
Stockmarkets
The correction up in stockmarkets has probably finished but there is a possibility that it will continue for another couple of months. What is important is that it is a correction (we predicted it already back in January) and it will soon lead to a strong resumption of the downtrend. In the Dow Jones, a break of the trend line at 6400 would lead to a projected decline of at least 90% from the top. Almost all major world markets point to similar declines. This sounds incredible but bearing in mind that the Dow Jones fell 90% in the 1930’s and bearing in mind our discussion in the Dark Years paragraph above, this kind of target is not impossible.
Some commodity stocks as well as gold and silver mining shares will be major beneficiaries from the Crisis.
Bonds
We forecast at the beginning of the year that US long rates would go up and they have almost doubled since. But this is only the beginning since we expect US and UK long rates to reach at least the mid teens in the next 2-3 years. Interest rates in all countries will go up substantially in the next few years.
Currencies
The dollar and the pound will have very substantial falls in the autumn of 2009. At some later stage the Euro will also weaken as a result of certain countries breaking away from the Euro area.
Gold
The currency which will be the major beneficiary from the Crisis is Gold. We have invested in gold since 2002 when we saw the Crisis coming. Gold has trebled since then. But this is just the beginning. The next major move will take place in the coming 4-5 months and it will be major. Gold for wealth preservation purposes should be held directly by the investor and stored outside the banking system in his name. Holding gold in ETF form, futures or owning part of gold bars that you don’t have personal access to is not wealth preservation.
There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
Ludwig von Mises
The Dark Years are here
by Egon von Greyerz – Matterhorn Asset Management
In this newsletter we will outline what is likely to be the devastating effect of the credit bubbles, government money printing and of the disastrous actions that governments are taking. Starting in the next 6 months and culminating in 2011-12 the world will experience a series of tumultuous events which will be life changing for most people in the world. But 2011-12 will not be the beginning of an upturn in the world economy but instead the start of a long period of economic, political and social upheaval that could last for a couple of decades.
We will discuss the three areas that we for some time have argued will determine the fate of the world for the foreseeable future, namely the coming unemployment explosion, the next and much more serious phase in the credit markets and finally the likely hyperinflationary or just inflationary effect this will have on the world economy and investments.
EMPIRES ARE BUILT ON THEFT PILLAGE, SLAVE LABOUR AND FINALLY MONEY PRINTING
Let us first go back in history and analyse what creates an empire and the prosperity that comes with it.
The British Empire started in the 17th century and reached its peak in the 19th century during Queen Victoria’s reign. By the end of the 19th century The British Empire included nearly 20% of the land surface of the world and 25% of the world’s population. So Britain which is less than 0.5% of the world’s land surface area controlled an empire which was more than 50 times greater. So by using slave labour and by stealing the resources of 20% of the world, it is no wonder that Britain was the wealthiest nation for several centuries. But like all empires, Britain carried the seeds of its own destruction. All empires – e.g. Mongolian, Roman, Ottoman or British etc. – eventually overstretch their resources both militarily and financially. This combined with decadence and illusions of grandeur eventually leads to the collapse of an empire.
The US empire was slightly different from the point of view that it never conquered the world although the US was itself a colony conquered from its original inhabitants. But the US has intervened in many areas (e.g. Korea, Vietnam, Afghanistan, Iraq etc.). Also, there are US military bases in 120 countries. Initially the US was an economic superpower based on an entrepreneurial spirit and a very strong production machine backed by fierce military power. But after the Vietnam war the US had overstretched its resources and by 1971 Richard Nixon abolished the gold standard in order to be able to start money printing in earnest. The money printing phase is normally the last stage of an empire before it collapses and this is where the US is now. The US dollar became the reserve currency of the world when the US was strong economically. But as the US economy started to weaken in the 1960-70’s the US government found a much better method for maintaining a strong economy. It started to print paper that it sold to other nations or exchanged for goods and services. For almost 50 years this has been the most clever way ever devised of maintaining the living standards of an economically deteriorating nation without even having to spend any resources on building an empire. It is a Ponzi scheme which has worked for several decades but slowly the world is now waking up to the fact that they are holding worthless paper printed by the US Government. (We realise this is a much simplified version of empire building and destruction but it is nevertheless an accurate analysis).
THE US GOVERNMENT IS IN DENIAL
The US is haemorrhaging financially and economically. It has lent or committed almost $13 trillion in the last 18 months to prop up the financial system. The estimated government deficit in the current year is almost $2 trillion or 50% of the budget. All the money committed so far has only achieved two things: Firstly it has created some short term hope which together with totally illusionary sightings of green shoots have generated a small stock market correction (which we forecast in our January Newsletter) and some belief that the crisis is ending. Secondly, all the funds printed so far to save the system have gone to Wall Street but has done nothing whatsoever for the real economy. Every single sector of the real economy is deteriorating whether it is production, unemployment, corporate profits, real estate, credit defaults, construction, federal deficits, local government and state deficits etc.
And what is the government doing about it. They are doing the only thing they know which is to print more money.
This is total lunacy! How can any intelligent person believe that printed pieces of paper can solve an economic catastrophe?
If that were the case we could all go home and write out pieces of paper or use Monopoly money to spend in the shops or repay our debts.
How can the US government, the UK government and most other governments not understand that the only way to run an economy is to cut your coat according to your cloth. This is why the emperor had no clothes because the country had run out of gold thread to make the cloth. Until now the US as well as other countries have been able to buy the cloth because the world has been foolish enough to accept worthless pieces of paper as payment. But this is coming to an end very soon and many countries will be without both coats and cloth.
What governments are doing with people’s money is to totally destroy its value. Purchasing power in the US and many other countries has declined more than 95% in the last 100 years. While it might buy votes short term it will only generate massive misery long term. And this is what many countries are starting to experience now. But sadly it will get a lot worse. We are still only in the first phase of this tragic saga. The second phase is likely to start in the next 6 months.
THE US HAS 100 MILLION AFFECTED BY UNEMPLOYMENT
The real unemployment in the US is 20% or 30 million. These are the real unadjusted figures calculated on the same basis as the official figures before the method of the calculation was changed in the 1990’s. Reported government figures, especially in the US, are continually manipulated in order to suit the political aims of the government. Therefore, one should not give any credence to the published figures. Most governments mislead the people most of the time.
With 20% unemployment in the US we are already approaching the levels in the 1930’s when peak total unemployment reached 25%. The 20% current level is the non-farm unemployed and is still a lot lower than the non-farm peak figure in the 1930’s which was 35% unemployed.
Since we are still in the early stages of this crisis, it is our firm opinion that non-farm unemployment levels will reach 35% at least in the US in the next few years.
But even the current figure of 30 million unemployed is a catastrophe. Adding dependants to every unemployed person there are currently 100 million people affected by unemployment in the US. In the next three months 3 million unemployed will fall out of the social security safety-net. These are the people who were laid off in the second half of 2008. Including their families this means that around 10 million people will become destitute between now and September with no social security and no savings. If we then add the 4 million that were made redundant in the first half of 2009 that will result in an additional 13 million people including families will become destitute around Christmas. This is a disaster of unimaginable consequences that will affect the whole fabric of American society.
The consequences will be social, political, financial and the effects on the US economy will be of a magnitude which is substantially greater than during the Depression of the 1930’s. We must remember that none of the problems in the financial system have been resolved but only put on a very temporary hold. The rise in unemployment combined with the reduction in consumption will lead to the next and much more severe banking crisis.
Unemployment in Europe is also rising fast and shows no signs of abatement. Many countries are reaching 10% with for example Spain at 19% and Latvia at 16%. But as we have said for quite some time, of the larger European nations, the country with the biggest problems is the UK. Unemployment in the UK is currently “only” 2.5 million or 7% but it is estimated to reach over 3 million by the end of 2009. The combination of government deficits, a banking system which is extremely fragile and too big for the country, very high personal credit that will not be repaid and a housing bubble which still has a long way to fall makes the UK very vulnerable to a major financial shock.
During the next 6-9 months unemployment will severely affect most parts of the world including China, Asia and Africa. Never before has there been a global unemployment crisis affecting the world simultaneously. This will not only mean a massive decline in consumption and world trade leading to a recession or depression worldwide but also poverty, famine and social unrest.
THE BANKERS ARE STILL RUNNING THE SHOW
The masters of the financial circus are the bankers. Not only did they reap the benefits from manufacturing toxic financial products to the extent of receiving bonuses and stocks in the $trillions during the last 15-20 years. But they are also the only beneficiaries of the trillions of dollars that have been printed by governments to rescue the financial system. Why are the bankers benefiting from the rescue of their own banks? Because they are the ones controlling the government, advising the government and making major contributions to the politicians.
Bonuses are back
Yes, many banks are paying higher bonuses in 2009 than 2008. Goldman Sachs is on course to pay bonuses of $20 billion or $700,00 per employee and Morgan Stanley a 30% increase from average per employee of $262,000 last year to $340,000 this year. JP Morgan’s bonus pool for the first quarter of 2009 is up 175% to $3.3 billion and the new chief executive of RBS, the nationalised UK bank is getting an incentive package worth £10 million! Similar bonuses are being paid by many other banks. Barclays Capital for example is on a massive spending spree recruiting executives with golden hellos and guaranteed bonuses of millions per employee.
Central banks and governments worldwide have spent trillions of dollars temporarily propping up a totally bankrupt financial system and now a few months later the bankers are back earning absurd money within a banking system which hasn’t been mended and is still bankrupt. This is scandalous.
Toxic Structures are back
But not only that, they are also back to creating new securitisation programmes in order to reduce capital requirements and increase leverage. Goldman Sachs, and Barclays Capital are doing this already and many other banks will follow. It is exactly these types of programmes that created the financial crisis in the first place and now the bankers are back at it again. This is totally disgraceful and irresponsible behaviour by bankers who have learnt nothing from their disastrous freewheeling actions except how to milk the system to the maximum again.
As we have pointed out before, none of the problems in the banking system have been resolved. The system still has a leverage of 25-50 times, it is still full of toxic debt and derivatives, loan books are deteriorating daily, it still has worthless paper assets valued at fantasy prices and most banks are run by the same bankers who created the problems in the first place. For a typical bank, a 4% drop in asset value wipes out the equity. This is what we call a recipe for disaster.
In the meantime governments are making feeble attempts at preventing a future crisis by planning new regulations. But these regulations will only deal with known and historic problems. The bankers will again run rings around the authorities in creating new structures to circumvent the new rules.
ACCELERATION OF THE DOWNTURN IS ABOUT TO START
The next phase of this tragic saga will soon start.
Compared to the of the 1930’s we are already in a worse position today than at the same stage of the Great Depression. Industrial production is worse in many countries. World trade is worse and the stock market fall is greater than at the same stage in the corresponding period of the Depression and both government and private debt is a lot worse.
So what is likely to happen next?
» Unemployment will increase government deficits
First unemployment will rise substantially as outlined above and the effects of the unemployed masses will have major repercussions on the economy. This will lead to government deficits growing substantially. Tax revenue is already falling at alarming rates in the US and UK and most other countries but it will get a lot worse. Government expenditure will rise rapidly due to the mass unemployment. Taxes will rise but this will be like getting water out of a stone – there won’t be much revenue to tax. And if Vat or sales taxes are increased this will kill consumption even more. In addition governments will have to implement more programmes to help the poor, hungry and homeless. This will lead to more money printing.
» Next phase of bank problems
Secondly the next phase of problems in the financial system will start by the autumn of 2009 at the latest. Since this will come as a total shock to everyone the effect will be much worse than in 2008. So far US banks have taken losses of $1.1 trillion. Conservative estimates put total losses at $2.2 trillion but realistic estimates are around $4 trillion and this excludes any problems in the $600 trillion to $1 quadrillion derivatives market a big part of which is worthless. In the next round of capital raising for banks there will only be one investor – the government. Thus there will be more money printing.
» Government paper will collapse – first in the US and UK
With the escalation of money printing markets will be flooded with government paper which nobody wants, leaving governments to buy its own junk. The two countries with the worst problems are the UK and the US and their precarious situation will emerge first. Within the next few months rating agencies are likely to downgrade both countries’ debt. This will lead to the value of the treasury bonds and gilts collapsing and interest rates quickly moving up into the teens. The higher rates will make the financing costs of the debt to up exponentially leading to more money printing and higher interest rates. This is the “perfect” vicious circle that will end in a hyperinflationary depression.
» Hyperinflation is a currency driven event
For many years we have been saying that this crisis will by hyperinflationary. The issuing of unlimited government paper will lead to the rest of the world selling their holdings of US/UK treasuries as well as selling the dollar and the pound. Most so called financial experts have been predicting a deflationary recession/depression since they don’t see the demand pull that they think is the cause of hyperinflation. We have been one of the very few (together with the very wise Jim Sinclair) to understand that hyperinflation is a currency driven event. The issuing of unlimited government paper outlined above will lead to the US dollar as well as the pound collapsing. It is the collapse of the currency which leads to hyperinflation. Without fail in history every hyperinflationary event has been caused by a collapsing currency not by demand pull.
Many other nations will also experience hyperinflation such as the Baltic States, certain Eastern European and Asian Countries. Many more countries will have high inflation.
THE DARK YEARS
In the next few months we will see the start of the Dark Years. For the first time in the history of the world there will be a synchronised downturn affecting all nations (although some a lot worse than others).This is the culmination of the world and especially the Western world, living above its means for decades in a mania of credit bubbles, asset bubbles, real estate bubbles as well as excesses leading to decadence and a society with very weak moral and ethical values. (Of course no society recognises this as it is happening but only afterwards). Governments have fuelled this process by printing unlimited amounts of paper thus destroying the money and purchasing power of most nations.
The Dark Years will be extremely severe for most countries both financially and socially. In many countries in the Western world there will be a severe depression and it will be the end of the welfare state. Most private and state pension schemes are also likely to collapse. It will be a worldwide depression but some countries may only have a deep recession. There will be famine, homelessness and misery resulting in social as well as political unrest. Different type of government leaders and regimes are likely to result from this.
How long will the Dark Years last? There is a book called ”The Fourth Turning” written by Neil Howe. He has identified a pattern that repeats itself every 80 years. The pattern has been extremely accurate in the Anglophile world. We have recently entered the Fourth Turning which is the final 20 years of the cycle. According to Howe we are in the early stages of a 20 year period of economic and institutional upheaval. This is a period of Crisis when the fabric of society will change dramatically. Previous Fourth Turnings have been the American Revolution, Great Depression and World War II. According to Howe the Crisis will be substantially worse before it is over and it will last for another circa 20 years.
All of this is not good news and we hope that we and Howe are wrong regarding the severity and length of this crisis. But we fear that we are both right. We must stress again that never previously has the the whole world entered a downturn simultaneously in such a fragile state both financially and economically which is why the Dark Years are likely to be so devastating and long lasting.
FINANCIAL MARKETS
Stockmarkets
The correction up in stockmarkets has probably finished but there is a possibility that it will continue for another couple of months. What is important is that it is a correction (we predicted it already back in January) and it will soon lead to a strong resumption of the downtrend. In the Dow Jones, a break of the trend line at 6400 would lead to a projected decline of at least 90% from the top. Almost all major world markets point to similar declines. This sounds incredible but bearing in mind that the Dow Jones fell 90% in the 1930’s and bearing in mind our discussion in the Dark Years paragraph above, this kind of target is not impossible.
Some commodity stocks as well as gold and silver mining shares will be major beneficiaries from the Crisis.
Bonds
We forecast at the beginning of the year that US long rates would go up and they have almost doubled since. But this is only the beginning since we expect US and UK long rates to reach at least the mid teens in the next 2-3 years. Interest rates in all countries will go up substantially in the next few years.
Currencies
The dollar and the pound will have very substantial falls in the autumn of 2009. At some later stage the Euro will also weaken as a result of certain countries breaking away from the Euro area.
Gold
The currency which will be the major beneficiary from the Crisis is Gold. We have invested in gold since 2002 when we saw the Crisis coming. Gold has trebled since then. But this is just the beginning. The next major move will take place in the coming 4-5 months and it will be major. Gold for wealth preservation purposes should be held directly by the investor and stored outside the banking system in his name. Holding gold in ETF form, futures or owning part of gold bars that you don’t have personal access to is not wealth preservation.
There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
Ludwig von Mises
Here is an interesting post found elsewhere.
"I think significant numbers for TARM are a ways off yet. As mentioned on another board, the technical report, if read in its entirety, gives detailed step by step processes necessary to outline the resources for Don Ramon and neighboring sites.
I expect first they will PR production startup at DR and then, sampling and drilling to determine directions for mining and future development of DR.
Exploration of other nearby targets will come then to justify increased mill capacity.
Centenario will surely be a priority due to it's proximity to DR.
Picacho is likely a future consideration for development once DR is in advanced stage.
As for Tara Gold, you can bet Rich is working on other projects. In the future I expect to hear about what has been done, after the fact, rather than what he hopes to do, before the fact.
Deals are made and prices and terms agreed to, long before the announcements are made. Sometimes you have to wait for all the pieces of the puzzle before you can show it off. (or sell it).
Many issues are addressed in the Technical report for Don Ramon. I would like to hear how others view the overall report.
These are my thoughts and mine alone. I care not if posters here buy or sell. I do appreciate reading other's thoughts and insights about stocks which I own, so feel free to respond."
I have heard that a couple of production lines are functioning,not sure of the quality of my source.
Still,enough has occurred in the last 2 months for us to believe production and cashflow are close.Rich is close-mouthed on the when however that is sensible given the exigencies of real mining.Having the cash to solve most mining problems is reassurring.
Patience is a fine quality but a hard one to garner to one's self.
An interesting post uplifted of another board.Indirectly,it makes a good case for being in gold,silver and hard commodities-preferably with cashflow.(come on TARM)
"I have never seen, nor did I ever expect to see, such in-your-face looting and lawlessness by the major commercial players. And not only does it go unpunished, it gets rewarded by the gang of criminal morons running this country for Wall Street's benefit.
Today, we read that ratings agency Standard & Poor lowered the ratings on some 2007-vintage commercial mortgage-backed securities from the top grade of AAA all the way to the lowest grade above junk, BBB-, and then raised it back to Triple-A Highest Investment Grade Absolutely Secure Virtually No-Risk Bonds again.
All in the same week.
I know you realize this, but I have to say it anyway: It's impossible for a bond's investment quality to shift from AAA to BBB- and back to AAA in a single week. It's hard to imagine how it could happen legitimately in a month, or two months.
Well, what happened then? Simple. S&P was under pressure to reduce their rankings on this debt before it went into delinquency and they looked even more complicit than they already do. So they downgraded the bonds to barely above junk--and then "somebody" needed those bonds to become eligible as TALF collateral.
But only Triple-A debt can be offloaded onto the Fed for a Term ABS Lending Facility swap-out.
So S&P simply reversed the downgrade. "Whaddya know, folks? We adjusted our guesses about when the underlying commercial mortgages would blow up, and Hey Presto! Triple-A again!"
Well, praise be unto Allah. And despite this kind of brazen fraud, S&P has not had their charter revoked. So, now those junkers will be added to the mountain of taxpayer liabilities on the Fed's balance sheet. One day, S&P will face a tsunami of lawsuits over their fraudulent ratings model.
http://www.bloomberg.com/apps/news?pid=20601087&sid=az_NZojlf5Ng
At the same time, the biggest crooks among commercial banks are shoveling billions onto their own bonus piles after taking billions in taxpayer aid and hundreds of billions in taxpayer guarantees on their debt.
Goldman Sachs has diverted ALMOST HALF OF GS PROJECTED ANNUAL REVENUE to bonus pools. Goldman employees will average close to $800,000 each in bonuses, including the file clerks and wiretappers.
Morgan Stanley, who just reported a big increase in projected losses, set aside 72% OF REVENUE in the second quarter for bonuses. You can't run a business like that without destroying it, UNLESS you have someone to offload the losses onto.
When nations fall, the barbarian hordes at the helm always loot the treasury on their way out. Think Marcos in the Philippines, the nomenklatura in the Soviet Union, de la Rua and the Kirchners in Argentina, Baby Doc Duvalier in Haiti. They wire the money to Zurich or Paris and race away in a private jet.
The American empire is ending, and Wall Street and their congressional henchmen are stripping the plumbing and wiring out of the walls as they watch the edifice crumble. They don't care what kind of poverty, ruin and misery they leave behind. They're getting out (they hope) before it crashes down.
The mass of American investors are culpable in this, right this moment. Let me explain.
When Bernie Madoff went down, it soon came to light that many, if not most, of the asset managers who placed their clients' money with Madoff knew something was wrong. They were asked, off the record, why they participated in the Madoff funds if they thought he was cheating. "Well, we figured he was doing some kind of insider trading, front-running or whatever. And he never got caught, he just kept returning 12% every year so we figured, Hey, why not get our share?"
The Fed and Treasury have become the new Bernie Madoff. Investors know the country is in trouble. They know unemployment is soaring. They know residential real estate is still falling and foreclosures are still rising and setting new records. They know that lenders and automakers and insurance companies are failing. They know credit card delinquencies are hitting new records. They know that commercial real estate is going over the falls and commercial lending is in deep trouble with the CIT story. They know that the nation's debt is exploding and Obama's fixes are failing and the Fed's countless bailouts haven't done anything except enrich trading banks while burying the taxpayer in unpayable liabilities.
Yet they keep buying the stock markets up. Why is that? I submit that it's because they think that the markets have a secret inside game going on; they think the Fed and the Treasury will keep the markets afloat with free money, crooked accounting tricks, and special rescues carried on in the dark--forever, or at least until they can make a bundle and bring back the Gold-plated Retirement they looked forward to.
Well, good luck with that. This government, with its crooked money and its crooked Treasury and crooked central bank, is a giant Ponzi scheme. The people participating in it don't care that it's crooked, as long as they think they're getting richer by getting something for nothing.
Writer Clive Staples Lewis once noted that evil always carries the seeds of its own destruction. This crooked game is a live grenade, and the pin has already been pulled. It's just a question of who will be holding it when time runs out"
The fed does not run the USA per see.The people that own the fed run the USA.None of what is happening to the USA economy now is by accident.The USA is to be broken financially so its citizens will accept the planned tyranny of the NWO.
If you have read "The Creature From Jekyll Island,you seem to have gained almost no understanding.
I have no need to debate the economic situation,I have no reason to doubt my beliefs.
Seeker,
you clearly believe TRGD/TARM are another way to burn money,like allowing the fed to run america.
If you believe the miners are rot,you would not own them.As you do not own them,what are you doing on this board?
Just adding to your points Sam.
The move initially did not make sense to me.Picacho was considered a prime property so why would TRGD dispose of it?
A fact:TRGD still will be able to attribute 82% of Picacho to itself,via the TARM holding.Not a big loss-18%.So,if Picacho looked good and added value,TRGD still gets added value.
The beauty of the move,as I speculate ,is this,TARM gets a revaluation on good news from Picacho.
The possible share price gains, both TRGD and TARM get ,when Picacho has any good news.A double up.
Hmm.Centenario has gold and apparently rich ore.I look
forwards to more exploration and some drilling there.
Another good price move but on low volumn.No one is selling TARM .The current price is well up on issue price,not many juniors can say that lately but there looks like an easy double from here.
TRGD had debt.Hardly surprizing.They cleared that debt.Rough calculation,maybe 2-2 1/5 million of debt.So what?
Why do you own shares in this awful company?
You must really want to suffer.
Forced to own a company you do not want.Hmm.
Selective provision of TRGD news releases .Hmm.
Now a sincere search of the TRGD site would have revealed the detail you alledgedly seek.You forget,TRGD had debts prior to the sale of PZG.
"CHICAGO, June 1, 2009 (MARKETWIRE) – (Other OTC: TRGD.PK and Frankfurt: T8N) Tara Gold Resources Corp. announces that it has monetized its Paramount Gold and Silver Corp. equity holdings. A portion of the holdings were used to acquire 2,147,000 shares of Tara Minerals Corp. common stock held by investors, a portion was used to pay off existing loans, and the remainder was sold to investors.
On October 2, 2008, Tara Gold closed the sale of its remaining San Miguel project interest to Paramount Gold and Silver Corp. for common shares of Paramount. With this divestiture, Tara Gold no longer holds a majority interest in Paramount.
With this sale, Tara Gold has strengthened its holdings in Tara Minerals Corp., eliminated its long term debt, and has set aside $4.5 million for working capital.
Mr. Francis Biscan Jr., President of Tara Gold Resources Corp., stated, "Without diluting our shareholders, we now have a strong cash position which will be used to advance our priority projects, including the commencement of full scale mining and production start-up at Don Ramon."
Survival through the extremely difficult 2008 is a feat,more so if you consider,we still hold our best properties.Freehold high quality properties.And do look at the calibre of our production staff.They have clearly not joined TARM to get cheques for a month or two.They want in on a serious mining venture with considerable expansion possibilities.
Sure,the sincere shareholders here want to see production occurring but do not think 300-400 tons a day is the medium term TARM target.TARM is no one hit miner.
Schedule,keep a possible schedule with near no money.Not easy.Regardless of the delay,we still own this prime property.You conveniently confused 2008 and 2009.Much of the development of our mine site,occurred in 2008.Where Rich found the initial development cash from attests to considerable skill and determination.
Rich may or may not have underestimated the cost of developing our mining operation.Few mines meet targets of price or deadline.Harder still when very short of cash-like most juniors.One might add,our clever model of using JVs to give us a collection of properties,exposed TRGD in the sharp downturn.
Now might one ask that you countenance facts?TRGD sold 4.6 million PZG shares for $4.9 million,thereby fixing our cash problem.A wise move or not?Well look at the subsequent movement in the share price of TRGD and TARM.
The share price movement is the real vote of confidence.
Why are you here when you are clearly not a shareholder?
Regarding Rich's performance,the miracle is that TRGD did not go bankrupt in 2008.What with JV partners falling over and on going property payments,somehow Rich scrapped up over $2 million to develop Don Ramon.
You will have to work hard now to hurt the shareprice as you do not have a lot of time;the production will be started within 10 weeks.Now as we all know,meeting deadlines is fraught in the world of mine production but Rich has the cash now to move things along.
I trust Rich a lot more than I thrust your motivation.
GORO is certainly looking good with another 7-8 % rise today.
With Torquiville apparently having bought more,Horchild keen to buy more,the stock is increasingly getting locked up by major shareholders.Once the pernmit is through,I do not expect to see GORO below $6 again.
Yes,one needs big ears in this game.
Don Ramon has been progressing but one or two variables could hold things up further.Once mining(And over normal teething problems)production $ should see us making a lot ,relative to the TARM share price.Very low PEs move share prices up.Not hard to come to a possible PE ratio.
Centenario may be more promising than Don Ramon.
A number of analsts see base metals making a recovery-that would do TARM shareholders a lot of good.
.Yes,Centenario sounds like it offers enormous potential.
Chatting with fellow shareholders regarding current profit potential,TARM cannot make the huge numbers when base metals were higher.However,most suggest a profit of near $1 million a month.Now if we just round figure $12 million a year,against a M/C of 40 times 30cents million.= $12 million.Now that forecast PE is LOW.
It is not hard to seeTARM at $1 a share in 2009.
One of my TARM friends suggested I am conservative and he is likely right.
Let us agree,a rerating may not be too far away.
Now TARM at say $1 would make for TRGD at somewhere over 25 cents.
(Oh,i do not expect production guidelines to bemeet instantly,fine tuning and minor teething problems are normal.Could take a few months more to pull a million a month-but at least it is in the crosshairs.
Triple me up Scotty.
Of course,as Happy points out,
Good strong TARM cashflow gives our CEO money.real,not from a JV money.
Money to start initial production at centenario.Now 2 open pit mines making money-that starts to sound 'interesting.
We have been through the mill last 18 months,true.But one thing,one positive thing stands out above all.Rich and Ramario buy superb properties-as shown by the number of JVs we have had.Properties bought on a shoestring.
So I ask,what could out team find/buy,if TARM was sitting on $10 million in cash?
Ic am not saying,hot TARM hard,i bought too many 2 years ago.But I am saying,a moderate stake in TARM,or its parent,TRGD,does seriously have big long term potential.
.Yes,Centenario sounds like it offers enormous potential.
Chatting with fellow shareholders regarding current profit potential,TARM cannot make the huge numbers when base metals were higher.However,most suggest a profit of near $1 million a month.Now if we just round figure $12 million a year,against a M/C of 40 times 30cents million.= $12 million.Now that forecast PE is LOW.
It is not hard to see TARM at $1 a share in 2009.
One of my TARM friends suggested I am conservative and he is likely right.
Let us agree,a rerating may not be too far away.
Now TARM at say $1 would make for TRGD at somewhere over 25 cents.
(Oh,I do not expect production guidelines to be meet instantly,fine tuning and minor teething problems are normal.Could take a few months more to pull a million a month-but at least it is in the crosshairs.
Triple me up Scotty.
Of course,as Happy points out,
Good strong TARM cashflow gives our CEO money.real,not from a JV money.Money to start initial production at Centenario.Now 2 open pit mines making money-that starts to sound 'interesting.'
We have been through the mill last 18 months,true.But one thing,one positive thing stands out above all.Rich and Ramario buy superb properties-as shown by the number of JVs we have had.Properties bought on a shoestring.
So I ask,what could out team find/buy,if TARM was sitting on $10 million in cash?
I am not saying,hit TARM/TRGD hard,I bought too many 2 years ago.But I am saying,a moderate stake in TARM,or its parent,TRGD,does seriously have big long term potential.
Off the new property,Rich writes that it will add "immensely" to Don Ramon.My reading is that the new property has more potential than Don Ramon.TARM now has 4 properties to develop.
Regardless,hopefully we are close to earning money as a producer soon.Once Don ramon is earning,that cash can be used to develop another open pit operation.Once we have a couple of open pit operations earning,I believe a fundamental change can occur,namely freedom to develop our own properties,independent of JVs.Sure,we could still do JVs when convenient,but the reliance on such would go.
It is the need of most juniors,for JVs to give them either drilling or development cash,that has sen them hit so hard as money has dried up.(See PZG.)
Here is to a new day,a new way,for TRGD and TARM.
I spoke to rich in November,I believe it was.
He said he will not make comment on TARM production till it is both happening and money received.
I spoke to Rich prior to Christmas.I cannot remember-maybe November.He was very conscious that TARM had not got mining underway,weather and other factors conspiring.
Rich said there will not be any production news till mining is both occurring and payment made.
I do hope we are there by February.
Re Rich,I think it fair to remember,a low TARA price ffects him more than any of us.(Though not much consolation I admit)
The confirmation of the sale of La Currita,is very positive.In this market,many juniors will go broke.This was my fear for TRGD due to it have many properties,though some are wholly owned.
TRGD has fine properties-that is likely to be our salvation.2 properties have been bought,maybe cheaply,but sell mining property in this market.Most difficult.
We have $2.75 million coming in over 2 years,for La Currita.That is great.I asked Rich about Don Ramon and he simply said,no future comments till it is mining and receiving money.Such news,hopefully will see an increase in cashflow.
You know,any 'cleer' property acquirer,could do very well in this market:We have that acquisitorial ability but not the cash for cashflow we would like.
I do not have much idea of TRGD's value now.I know I too have taken very painful losses.I am in for the ride as it eventuates-no point selling now.
I am not happy,I admit.But rubbishing TRGD /Rich does not seem to have much point,but to maybe lower the shareprice ,if that is possible!
I am a real money man-gold and silver.Gold has held up well,but both gold and silver have been hit by massive short selling by Goldmann Sachs and JP Morgan-in both cases,technically illegal but so much happening in the USA in the last few years smacks of deficiet and high level corruption-wlecome to plutocracy gone mad.
If gold and silver rise strongly,at some stage,common seme says such should affect the juniors-at some time.It is just that hlding the real metal allows one to sleep better.
Gold demand worldwide is exceeding supply,let alone in the silver markets.
Some silver dealers have 4-6 month silver delivery delays.
In Holland and London,people are cueing to buy gold,literally.
Yet,prices are not up that much for gold,they are down for silver.The manipulation on the futures market cannot artifically repress prices indefinitely.
Clive Maund sees a major breakout as the swelling demand swamps the crazy prices of the future world.Just try to buy silver for $12.If you can get a deal for $14 you are doing well.Then just wait for delivery.
Anyone know how much you pay for say a weeks delivery date?What sort of premium?
GORO and PZG are not for sale.
There were good reasons to buy silver and gold in the 1970s.
There are far better reasons to buy gold and silver today.
A higher resource estimate coming,along with more fine drill assays.
The SP looks crazy,then again,so does the price of silver.
Look at the price of silver.The price tells us the metal is doing little,a balanced demand supply situation,the basic laws of economics suggest.And of course,the price has nearly halved quite recently.Hmm,a dog without a tail.
But there is a tale.Try to buy silver.NZ,Australia,Holland,Canada,USA -join the cue.You will not buy it close to spot.No $12 silver anywhere.For example,the NZ Mint,for gold,but mostly silver,is doing a months business in a day now.Their demand situation has changed dramatically at these prices.And they are now selling quite a lot of gold 1 ounce pieces worldwide.In London,one dealer have gold buyers cueing in the shop,then cueing out in the street.Now consider delivery.
See how long you will have to wait.I was offered silver in 6-8 weeks,3 weeks ago.Now I am offered more silver,but the delivery delay is out to 16-20 weeks.The delivery dates are moving out because buyers are making the cue longer as supply cannot meet demand.But the price is not moving dramatically as the futures maket is fixed.
Clive Maund,on his website is seeing a major breakout occurring soon as the demand totally swamps the suppliers of coins and bars.This must happen at some stage.
America.Know your enemy.
September 29, 2008
House and Global Investors Vote "No" on Paulson Bailout
Black Monday?
By MIKE WHITNEY
Today the US House rejected Treasury Secretary Paulson's $700 billion Emergency Economic Stabilization Act of 2008. Paulson said he has the votes, but Paulson was wrong. The House bucked the Paulson's claim that buying up the illiquid mortgage-backed assets from the nation's banks would be enough to save the financial system from an impending meltdown. The jury remains out on that question, too. Professor Nouriel Roubini, chairman of Roubini Global Economics, summed it up like this, "You're not resolving the two fundamental issues: You still have to recapitalize the banking system, and household debt is going to stay high". A large number of economists believe Roubini is right. The bill would not solve the underlying problems.
There is a crisis. The banking system is undercapitalized, the credit markets are frozen, and foreign creditors are beginning to slow their purchases of US debt. It's all bad. At the same time the number of casualties among the financial giants--Bear Stearns, Indymac, AIG, Lehman, Washington Mutual--continues to grow. Three more struggling European banks were added to the list of financial institutions that needed emergency government assistance this past weekend. It's no wonder Congress feels like they have to do something to stop the bleeding.
Before the stock market opened on Monday, the futures markets had slumped heavily into negative territory, while the TED spread, an indicator of stress in interbank lending, had widened to 3.19, a level that suggests another rocky week of trading ahead. Could this be another Black Monday?
Paulson's bill was designed to avert a system-wide crash by clearing the banks' balance sheets so they could resume extending credit to consumers and businesses. The hope was that massive infusion of capital would "turn back the clock" to the happy days of low interest speculation and bubble economics. Paulson is a "one trick pony" who firmly adheres to the belief that wealth creation depends on maximum leverage and an ever-weakening currency. But that world view is no longer applicable after reaching Peak Credit, where consumers are no longer able to make the interest payments on their loans and businesses and financial institutions are forced to curb their spending and dump their toxic assets at firesale prices. The system is deleveraging and nothing can stop it. Paulson has yet to accept the new reality.
Besides, there was no guarantee that the banks would use the money in the way that Paulson imagines. As one Wall Street veteran explained to me, "I don't see one penny of that $700 billion ending up helping the broader economy. I see it being used to prop up share prices so the insiders can salvage as much as possible when dumping their shares".
Indeed, the $700 billion is just part of a massive "pump and dump" scheme engineered with the tacit approval of the US Treasury and the Federal Reserve. Once the banksters have offloaded their fraudulent securities and crappy paper on Uncle Sam, they will do whatever they need to do pad the bottom line and drive their stocks up. That means they will shovel capital into hard assets, foreign currencies, gold, interest rate swaps, carry trade swindles, and Swiss bank accounts. The notion that they will recapitalize so they can provide loans to US consumers and businesses in a slumping economy is a pipedream.
The US is headed into its worst recession in 60 years. The housing market is crashing, securitzation is kaput, and the broader economy is drifting towards the reef. The banks are not going to waste their time trying to revive a moribund US market where consumers and businesses are already tapped out. No way; it's on to greener pastures. They'll move their capital wherever they think they can maximize their profits. In fact, a sizable portion of the $700 billion will likely be invested in commodities, which means that we'll see another round of hyperbolic speculation in food and energy futures pushing food and fuel prices into the stratosphere. Ironically, the taxpayers’ largesse will be used against them, making a bad situation even worse.
Then again, if a rehabbed bill isn't passed, no one can predict with certainty what will happen. Here's how Tim Shipman summed it up in "Bailout Failure Will Cause US Crash", in the UK Telegraph:
"Officials close to Paulson are privately painting a far bleaker portrait of the fragility of the global economy than that advanced by President George W Bush in his televised address last week.
One Republican said that the message from government officials is that 'the economy is dropping into the john.' He added: 'We could see falls of 3,000 or 4,000 points on the Dow [the New York market that currently trades at around 11,000]. That could happen in just a couple of days.
'What’s being put around behind the scenes is that we’re looking at 1930s stuff. We’re looking at catastrophe, huge, amazing catastrophe. Everybody is extraordinarily scared. It’s going to be really, really nasty.'”
The fear on Capital Hill is palpable, especially among the Democrats who have led the effort to pass Paulson's boondoggle ASAP. Speaker of the House, Nancy Pelosi, and fellow Democratic Party leaders, Chris Dodd, Harry Reid and the blabbering blowhard from Massachusetts, Barney Frank, did everything in their power to sandbag dissenters, quash resistance, and rush the bill to a vote without the usual deliberation and debate. Rep. Marcy Kaptur (D-Ohio) was one of many angry members of congress who lashed out at Pelosi's highhandedness. It's all caught on a one minute video <http://redstaterebels.org/2008/09/wall-streets-greed-game/>:
Rep. Marcy Kaptur: "The normal legislative process that should accompany a monumental proposal to bail out Wall Street has been shelved. Yes, shelved! Only a few insiders are doing the dealing. These criminals have so much power they can shut down the normal legislative process of the highest lawmaking body in this land. All the committees that should be scanning every word that is being negotiated have been benched. And that means the American people have been benched. We are constitutionally sworn to protect this country against all enemies foreign and domestic, and yes, my friends, there are enemies....The people who are pushing this bill are the very same one's who are responsible for the implosion on Wall Street. They were fraudulent then; and they are fraudulent now.We should say No to this deal".
Republicans were equally furious at the way the Pelosi Politburo kept the rank and file out of loop as much as possible. Rep. Michael Burgess (R-Texas) summarized the feelings of a great many congressmen who felt they were being railroaded by Pelosi and Co: "We have seen no bill. We have been here debating talking points ...House Republicans have been cut out of the process and derided by the leaders of the House Democrats as "unpatriotic" for not participating in supporting the bill. Mr. Speaker, I have been thrown out of more meetings in the last 24 hours than I ever thought possible as an elected official of 800,000 citizens of N. Texas....Since we didn't have hearings, since we didn't have markup, let's at least put this legislation up on the Internet for 24 hours and let the American people see what we have done in the dark of night. After all, I have never gotten more mail on a single issue than on this bill that is before us tonight."
Rep Dennis Kucinich (D-Ohio) gave the best speech of the day railing against the financial industry and defending the interests of working class Americans.
Rep. Dennis Kucinich: "The $700 bailout bill is being driven by fear not fact. This is too much money, in too short of time, going to too few people, while too many questions remain unanswered. Why aren't we having hearings...Why aren't we considering any other alternatives other than giving $700 billion to Wall Street? Why aren't we passing new laws to stop the speculation which triggered this? Why aren't we putting up new regulatory structures to protect the investors? Why aren't we directly helping homeowners with their debt burdens? Why aren't we helping American families faced with bankruptcy? Isn't time for fundamental change to our debt-based monetary system so we can free ourselves from the manipulation of the Federal Reserve and the banks? Is this the US Congress or the Board of Directors of Goldman Sachs?”
There was greater opposition to the Paulson bill than any legislation in the last half century. The groundswell of public outrage has been unprecedented, and yet, Congress, completely insulated from the demands of their constituents, continues to blunder ahead following the same pro-industry script as their ideological twins in the White House. There's not a dime's worth of difference between the two parties. Not surprisingly, neither Pelosi nor any of the Democratic leadership has even met with any of the more than 200 leading economists who have stated unequivocally that the bailout will not address the central problems that are wreaking havoc on the financial system. Instead, they have caved in to Bush's demagoguery and the spurious claims of G-Sax bagman Henry Paulson, a man who has misled the public on every issue related to the subprime/financial fiasco so far.
There are parts of Paulson's Emergency Economic Stabilization Act of 2008 that every US taxpayer should understand, even though the media is keeping those facts obscured. In sections 128 and 132; the proposed bill would have suspend "mark to market" accounting. This means that the banks would no longer be required to assess the worth of their assets according to what similar assets fetched on the open market. For example, Merrill Lynch just sold $31 billion of mortgage-backed securities for $6 billion, which means that similar bonds should be similarly priced. Simple; right? The banks need to adjust the value of those assets on their balance sheet accordingly. This gives investors and depositors the ability to know whether their bank is in bad shape or not. But Paulson's bill lifted this requirement and allowed the banks to assign their own arbitrary value to these assets, which is the same old Enron-style accounting scam.
Paulson's bill also proposed the "Elimination of FASB 157 and 0% reserves". This is just as sketchy as it sounds. FASB or Financial Services Regulatory Relief Act reads:
"Federal Reserve Banks are authorized to pay banks interest on reserves under Section 201 of the Act. In addition, Section 202 permits the FRB to change the ratio of reserves a bank must maintain relative to its transaction accounts, allowing a zero reserve ratio if appropriate. Due to federal budgetary requirements, Section 203 provides that these legislative changes will not take effect until October 1, 2011."
It's all legal mumbo jumbo to conceal the fact that the banks can continue to operate with insufficient capital, which is why the system is currently blowing up. It all get's down to this: The reason the system is exploding is because the various financial institutions have been allowed--via deregulation--to act as banks and create as much credit as they choose without a sufficient capital base. When one reads about massive deleveraging, this relates directly to the fact that under-capitalized businesses were operating with too much debt in relationship to their capital. That's it in a nutshell; forget about the CDOs, the MBSs, the CDS and the whole alphabet soup of derivatives garbage. They were all inserted into the system so Wall Street landsharks could expand credit without supervision and balance trillions of dollars of debt on the back of a one dollar bill. This is why Paulson wants to suspend the rules which would bring credibility and trust back to the system. After all, that might impinge on Wall Street's ability to enrich itself at the public's expense.
Nouriel Roubini sites a study by Barry Eichengreen, "And Now the Great Depression", which points out why Paulson's $700 billion plan is likely to fail:
"Whenever there is a systemic banking crisis there is a need to recapitalize the banking/financial system to avoid an excessive and destructive credit contraction. But purchasing toxic/illiquid assets of the financial system is NOT the most effective and efficient way to recapitalize the banking system....
“A recent IMF study of 42 systemic banking crises across the world provides evidence of how different crises were resolved.
“First of all only in 32 of the 42 cases there was government financial intervention of any sort; in 10 cases systemic banking crises were resolved without any government financial intervention. Of the 32 cases where the government recapitalized the banking system only seven included a program of purchase of bad assets/loans (like the one proposed by the US Treasury). In 25 other cases there was no government purchase of such toxic assets. In 6 cases the government purchased preferred shares; in 4 cases the government purchased common shares; in 11 cases the government purchased subordinated debt; in 12 cases the government injected cash in the banks; in 2 cases credit was extended to the banks; and in 3 cases the government assumed bank liabilities. Even in cases where bad assets were purchased - as in Chile - dividends were suspended and all profits and recoveries had to be used to repurchase the bad assets. Of course in most cases multiple forms of government recapitalization of banks were used." (Nouriel Roubini's Global EonoMonitor.)
In short, it wouldn't work. Nor was it designed to work. The bill was just Paulson's way of carving a silver canoe for he and his brandy-drooling investor buddies so they can paddle away to some offshore haven while the rest of us drown in a bottomless ocean of debt.
Mike Whitney lives in Washington state. He can be reached at fergiewghitney@msn.com <mailto:fergiewghitney@msn.com>
America.Know your enemy.
September 29, 2008
House and Global Investors Vote "No" on Paulson Bailout
Black Monday?
By MIKE WHITNEY
Today the US House rejected Treasury Secretary Paulson's $700 billion Emergency Economic Stabilization Act of 2008. Paulson said he has the votes, but Paulson was wrong. The House bucked the Paulson's claim that buying up the illiquid mortgage-backed assets from the nation's banks would be enough to save the financial system from an impending meltdown. The jury remains out on that question, too. Professor Nouriel Roubini, chairman of Roubini Global Economics, summed it up like this, "You're not resolving the two fundamental issues: You still have to recapitalize the banking system, and household debt is going to stay high". A large number of economists believe Roubini is right. The bill would not solve the underlying problems.
There is a crisis. The banking system is undercapitalized, the credit markets are frozen, and foreign creditors are beginning to slow their purchases of US debt. It's all bad. At the same time the number of casualties among the financial giants--Bear Stearns, Indymac, AIG, Lehman, Washington Mutual--continues to grow. Three more struggling European banks were added to the list of financial institutions that needed emergency government assistance this past weekend. It's no wonder Congress feels like they have to do something to stop the bleeding.
Before the stock market opened on Monday, the futures markets had slumped heavily into negative territory, while the TED spread, an indicator of stress in interbank lending, had widened to 3.19, a level that suggests another rocky week of trading ahead. Could this be another Black Monday?
Paulson's bill was designed to avert a system-wide crash by clearing the banks' balance sheets so they could resume extending credit to consumers and businesses. The hope was that massive infusion of capital would "turn back the clock" to the happy days of low interest speculation and bubble economics. Paulson is a "one trick pony" who firmly adheres to the belief that wealth creation depends on maximum leverage and an ever-weakening currency. But that world view is no longer applicable after reaching Peak Credit, where consumers are no longer able to make the interest payments on their loans and businesses and financial institutions are forced to curb their spending and dump their toxic assets at firesale prices. The system is deleveraging and nothing can stop it. Paulson has yet to accept the new reality.
Besides, there was no guarantee that the banks would use the money in the way that Paulson imagines. As one Wall Street veteran explained to me, "I don't see one penny of that $700 billion ending up helping the broader economy. I see it being used to prop up share prices so the insiders can salvage as much as possible when dumping their shares".
Indeed, the $700 billion is just part of a massive "pump and dump" scheme engineered with the tacit approval of the US Treasury and the Federal Reserve. Once the banksters have offloaded their fraudulent securities and crappy paper on Uncle Sam, they will do whatever they need to do pad the bottom line and drive their stocks up. That means they will shovel capital into hard assets, foreign currencies, gold, interest rate swaps, carry trade swindles, and Swiss bank accounts. The notion that they will recapitalize so they can provide loans to US consumers and businesses in a slumping economy is a pipedream.
The US is headed into its worst recession in 60 years. The housing market is crashing, securitzation is kaput, and the broader economy is drifting towards the reef. The banks are not going to waste their time trying to revive a moribund US market where consumers and businesses are already tapped out. No way; it's on to greener pastures. They'll move their capital wherever they think they can maximize their profits. In fact, a sizable portion of the $700 billion will likely be invested in commodities, which means that we'll see another round of hyperbolic speculation in food and energy futures pushing food and fuel prices into the stratosphere. Ironically, the taxpayers’ largesse will be used against them, making a bad situation even worse.
Then again, if a rehabbed bill isn't passed, no one can predict with certainty what will happen. Here's how Tim Shipman summed it up in "Bailout Failure Will Cause US Crash", in the UK Telegraph:
"Officials close to Paulson are privately painting a far bleaker portrait of the fragility of the global economy than that advanced by President George W Bush in his televised address last week.
One Republican said that the message from government officials is that 'the economy is dropping into the john.' He added: 'We could see falls of 3,000 or 4,000 points on the Dow [the New York market that currently trades at around 11,000]. That could happen in just a couple of days.
'What’s being put around behind the scenes is that we’re looking at 1930s stuff. We’re looking at catastrophe, huge, amazing catastrophe. Everybody is extraordinarily scared. It’s going to be really, really nasty.'”
The fear on Capital Hill is palpable, especially among the Democrats who have led the effort to pass Paulson's boondoggle ASAP. Speaker of the House, Nancy Pelosi, and fellow Democratic Party leaders, Chris Dodd, Harry Reid and the blabbering blowhard from Massachusetts, Barney Frank, did everything in their power to sandbag dissenters, quash resistance, and rush the bill to a vote without the usual deliberation and debate. Rep. Marcy Kaptur (D-Ohio) was one of many angry members of congress who lashed out at Pelosi's highhandedness. It's all caught on a one minute video <http://redstaterebels.org/2008/09/wall-streets-greed-game/>:
Rep. Marcy Kaptur: "The normal legislative process that should accompany a monumental proposal to bail out Wall Street has been shelved. Yes, shelved! Only a few insiders are doing the dealing. These criminals have so much power they can shut down the normal legislative process of the highest lawmaking body in this land. All the committees that should be scanning every word that is being negotiated have been benched. And that means the American people have been benched. We are constitutionally sworn to protect this country against all enemies foreign and domestic, and yes, my friends, there are enemies....The people who are pushing this bill are the very same one's who are responsible for the implosion on Wall Street. They were fraudulent then; and they are fraudulent now.We should say No to this deal".
Republicans were equally furious at the way the Pelosi Politburo kept the rank and file out of loop as much as possible. Rep. Michael Burgess (R-Texas) summarized the feelings of a great many congressmen who felt they were being railroaded by Pelosi and Co: "We have seen no bill. We have been here debating talking points ...House Republicans have been cut out of the process and derided by the leaders of the House Democrats as "unpatriotic" for not participating in supporting the bill. Mr. Speaker, I have been thrown out of more meetings in the last 24 hours than I ever thought possible as an elected official of 800,000 citizens of N. Texas....Since we didn't have hearings, since we didn't have markup, let's at least put this legislation up on the Internet for 24 hours and let the American people see what we have done in the dark of night. After all, I have never gotten more mail on a single issue than on this bill that is before us tonight."
Rep Dennis Kucinich (D-Ohio) gave the best speech of the day railing against the financial industry and defending the interests of working class Americans.
Rep. Dennis Kucinich: "The $700 bailout bill is being driven by fear not fact. This is too much money, in too short of time, going to too few people, while too many questions remain unanswered. Why aren't we having hearings...Why aren't we considering any other alternatives other than giving $700 billion to Wall Street? Why aren't we passing new laws to stop the speculation which triggered this? Why aren't we putting up new regulatory structures to protect the investors? Why aren't we directly helping homeowners with their debt burdens? Why aren't we helping American families faced with bankruptcy? Isn't time for fundamental change to our debt-based monetary system so we can free ourselves from the manipulation of the Federal Reserve and the banks? Is this the US Congress or the Board of Directors of Goldman Sachs?”
There was greater opposition to the Paulson bill than any legislation in the last half century. The groundswell of public outrage has been unprecedented, and yet, Congress, completely insulated from the demands of their constituents, continues to blunder ahead following the same pro-industry script as their ideological twins in the White House. There's not a dime's worth of difference between the two parties. Not surprisingly, neither Pelosi nor any of the Democratic leadership has even met with any of the more than 200 leading economists who have stated unequivocally that the bailout will not address the central problems that are wreaking havoc on the financial system. Instead, they have caved in to Bush's demagoguery and the spurious claims of G-Sax bagman Henry Paulson, a man who has misled the public on every issue related to the subprime/financial fiasco so far.
There are parts of Paulson's Emergency Economic Stabilization Act of 2008 that every US taxpayer should understand, even though the media is keeping those facts obscured. In sections 128 and 132; the proposed bill would have suspend "mark to market" accounting. This means that the banks would no longer be required to assess the worth of their assets according to what similar assets fetched on the open market. For example, Merrill Lynch just sold $31 billion of mortgage-backed securities for $6 billion, which means that similar bonds should be similarly priced. Simple; right? The banks need to adjust the value of those assets on their balance sheet accordingly. This gives investors and depositors the ability to know whether their bank is in bad shape or not. But Paulson's bill lifted this requirement and allowed the banks to assign their own arbitrary value to these assets, which is the same old Enron-style accounting scam.
Paulson's bill also proposed the "Elimination of FASB 157 and 0% reserves". This is just as sketchy as it sounds. FASB or Financial Services Regulatory Relief Act reads:
"Federal Reserve Banks are authorized to pay banks interest on reserves under Section 201 of the Act. In addition, Section 202 permits the FRB to change the ratio of reserves a bank must maintain relative to its transaction accounts, allowing a zero reserve ratio if appropriate. Due to federal budgetary requirements, Section 203 provides that these legislative changes will not take effect until October 1, 2011."
It's all legal mumbo jumbo to conceal the fact that the banks can continue to operate with insufficient capital, which is why the system is currently blowing up. It all get's down to this: The reason the system is exploding is because the various financial institutions have been allowed--via deregulation--to act as banks and create as much credit as they choose without a sufficient capital base. When one reads about massive deleveraging, this relates directly to the fact that under-capitalized businesses were operating with too much debt in relationship to their capital. That's it in a nutshell; forget about the CDOs, the MBSs, the CDS and the whole alphabet soup of derivatives garbage. They were all inserted into the system so Wall Street landsharks could expand credit without supervision and balance trillions of dollars of debt on the back of a one dollar bill. This is why Paulson wants to suspend the rules which would bring credibility and trust back to the system. After all, that might impinge on Wall Street's ability to enrich itself at the public's expense.
Nouriel Roubini sites a study by Barry Eichengreen, "And Now the Great Depression", which points out why Paulson's $700 billion plan is likely to fail:
"Whenever there is a systemic banking crisis there is a need to recapitalize the banking/financial system to avoid an excessive and destructive credit contraction. But purchasing toxic/illiquid assets of the financial system is NOT the most effective and efficient way to recapitalize the banking system....
“A recent IMF study of 42 systemic banking crises across the world provides evidence of how different crises were resolved.
“First of all only in 32 of the 42 cases there was government financial intervention of any sort; in 10 cases systemic banking crises were resolved without any government financial intervention. Of the 32 cases where the government recapitalized the banking system only seven included a program of purchase of bad assets/loans (like the one proposed by the US Treasury). In 25 other cases there was no government purchase of such toxic assets. In 6 cases the government purchased preferred shares; in 4 cases the government purchased common shares; in 11 cases the government purchased subordinated debt; in 12 cases the government injected cash in the banks; in 2 cases credit was extended to the banks; and in 3 cases the government assumed bank liabilities. Even in cases where bad assets were purchased - as in Chile - dividends were suspended and all profits and recoveries had to be used to repurchase the bad assets. Of course in most cases multiple forms of government recapitalization of banks were used." (Nouriel Roubini's Global EonoMonitor.)
In short, it wouldn't work. Nor was it designed to work. The bill was just Paulson's way of carving a silver canoe for he and his brandy-drooling investor buddies so they can paddle away to some offshore haven while the rest of us drown in a bottomless ocean of debt.
Mike Whitney lives in Washington state. He can be reached at fergiewghitney@msn.com <mailto:fergiewghitney@msn.com>
y.
Yes,I can help here.
Please see Ted butler's recent article.His site is easy to find.
Basically a huge short position was taken,on the futures market.That was so large,it spurred selling by the longs.Tthat was similarly true of gold and the dollar,but the silver situation was more obvious.The move on silver is theoretically illegal,given its magnitude,but the dogs round the dogpound.
Best outlook for silver since the days of the Hunt brothers
By: Peter J. Cooper
-- Posted 26 September, 2008 | Digg This Article | Discuss This Article - Comments: 2
By: Peter J. Cooper
Not since the Hunt Brothers tried to corner the silver market in the late 1970s has there been more dramatic news for silver prices than last week’s confirmation from the Commodity Futures Trading Commission enforcement division is investigating the silver market.
This column tipped silver as a strong buy for mid-summer but did not anticipate the depths to which this market would fall in a 50 per cent retracement from the March high. The suspicion among silver bugs around the world has been that market manipulation was to blame for this exaggerated price movement which came at a time when stocks of bullion and especially silver coins ran very low.
Retail investors have recently been big buyers of silver bars and coins, while something fishy has been happening in the futures market with short positions. Silver investors have written hundreds of emails to US federal regulators and the result is a fresh investigation.
‘We take the threat of manipulation in the futures and options markets very seriously and employ a number of measures to prevent, identify and prosecute it,’ says Stephen Obie, acting director of enforcement.
The argument from silver bugs is that a small number of US banks have been holding a large portion of short positions — or bets that silver prices will fall — on the New York Mercantile Exchange. And indeed data shows that two US banks increased their short positions between July and August by 450 per cent and controlled 25 per cent of the market.
This time it is the enforcement rather than oversight division of the CFTC that is tackling the investigation. The oversight division performs overall market surveillance. The enforcement division looks at activities in a specific time period.
It may be that the CFTC enforcement division investigation reveals no wrong doing over the summer. Silver has always been a volatile commodity, and price swings can also be to the upside and benefit investors. But this investigation also puts the spotlight on silver at a very interesting moment in the precious metals bull market.
The American financial crisis bail-out plan looks a highly inflationary package however it is interpreted, with a $700 billion cash injection bringing the total cost of the crisis so far to around $1.5 trillion. More money in the system means more inflation, and this will tend to be skewed into certain asset classes that protect against inflation like gold and silver with their relatively fixed supply.
The bail-out plan is also bad news for the US dollar, and a further bout of dollar devaluation will be part of this attempt to re-flate the US economy. And anybody who has followed the bull market in precious metals will know that gold and silver move in inverse relation to the US dollar, so a weak greenback will benefit precious metals.
Now it has also been a notable feature of this bull market that silver has out performed gold in terms of price increases by a factor of almost two. Hence, the move by regulators to investigate price manipulation in the silver market comes at a point when there are already two powerful drivers behind a silver price advance: the global financial crisis and the gearing of silver to the gold price.
That makes a total of three strong reasons why silver prices will rocket upwards over the next couple of months: a price fixing investigation, a renewal of the bull market for precious metals during a financial crisis and the traditional leverage of silver to the gold price.
To obtain even better performance then you can choose to leverage the silver price advance by buying the so-called ‘pure-play’ silver producers. These are large silver mining companies whose profits will rise by an even greater percentage than the price of silver as the price movements in the metal flow straight to their bottom line.
The names of these silver companies are no secret and well known to global stock market investors. In the past the like of George Soros and Bill Gates have bought into the big names.
Investors who think the silver price is due for a major increase, and at current prices it is cheaper than it was 28 years ago – the only commodity to be in that position – should be buying these companies for maximum price leverage against the rising price of the underlying metal.
How high could silver prices go? Well, just to recover their inflation adjusted average price in 1980 silver would top $125 an ounce, and if markets overshoot then $200 is possible.
When you consider that the price at the time of writing is $13.50 that could prove to be the investment opportunity of the decade, and far more exciting than following Warren Buffet and waiting for the US financial sector to recover. Incidentally he successfully played the silver market a decade ago and doubled his money in a short period, so do not rule out his also getting in on silver again.
Peter J. Cooper
http://arabianmoney.net/
Best outlook for silver since the days of the Hunt brothers
By: Peter J. Cooper
-- Posted 26 September, 2008 | Digg This Article | Discuss This Article - Comments: 2
By: Peter J. Cooper
Not since the Hunt Brothers tried to corner the silver market in the late 1970s has there been more dramatic news for silver prices than last week’s confirmation from the Commodity Futures Trading Commission enforcement division is investigating the silver market.
This column tipped silver as a strong buy for mid-summer but did not anticipate the depths to which this market would fall in a 50 per cent retracement from the March high. The suspicion among silver bugs around the world has been that market manipulation was to blame for this exaggerated price movement which came at a time when stocks of bullion and especially silver coins ran very low.
Retail investors have recently been big buyers of silver bars and coins, while something fishy has been happening in the futures market with short positions. Silver investors have written hundreds of emails to US federal regulators and the result is a fresh investigation.
‘We take the threat of manipulation in the futures and options markets very seriously and employ a number of measures to prevent, identify and prosecute it,’ says Stephen Obie, acting director of enforcement.
The argument from silver bugs is that a small number of US banks have been holding a large portion of short positions — or bets that silver prices will fall — on the New York Mercantile Exchange. And indeed data shows that two US banks increased their short positions between July and August by 450 per cent and controlled 25 per cent of the market.
This time it is the enforcement rather than oversight division of the CFTC that is tackling the investigation. The oversight division performs overall market surveillance. The enforcement division looks at activities in a specific time period.
It may be that the CFTC enforcement division investigation reveals no wrong doing over the summer. Silver has always been a volatile commodity, and price swings can also be to the upside and benefit investors. But this investigation also puts the spotlight on silver at a very interesting moment in the precious metals bull market.
The American financial crisis bail-out plan looks a highly inflationary package however it is interpreted, with a $700 billion cash injection bringing the total cost of the crisis so far to around $1.5 trillion. More money in the system means more inflation, and this will tend to be skewed into certain asset classes that protect against inflation like gold and silver with their relatively fixed supply.
The bail-out plan is also bad news for the US dollar, and a further bout of dollar devaluation will be part of this attempt to re-flate the US economy. And anybody who has followed the bull market in precious metals will know that gold and silver move in inverse relation to the US dollar, so a weak greenback will benefit precious metals.
Now it has also been a notable feature of this bull market that silver has out performed gold in terms of price increases by a factor of almost two. Hence, the move by regulators to investigate price manipulation in the silver market comes at a point when there are already two powerful drivers behind a silver price advance: the global financial crisis and the gearing of silver to the gold price.
That makes a total of three strong reasons why silver prices will rocket upwards over the next couple of months: a price fixing investigation, a renewal of the bull market for precious metals during a financial crisis and the traditional leverage of silver to the gold price.
To obtain even better performance then you can choose to leverage the silver price advance by buying the so-called ‘pure-play’ silver producers. These are large silver mining companies whose profits will rise by an even greater percentage than the price of silver as the price movements in the metal flow straight to their bottom line.
The names of these silver companies are no secret and well known to global stock market investors. In the past the like of George Soros and Bill Gates have bought into the big names.
Investors who think the silver price is due for a major increase, and at current prices it is cheaper than it was 28 years ago – the only commodity to be in that position – should be buying these companies for maximum price leverage against the rising price of the underlying metal.
How high could silver prices go? Well, just to recover their inflation adjusted average price in 1980 silver would top $125 an ounce, and if markets overshoot then $200 is possible.
When you consider that the price at the time of writing is $13.50 that could prove to be the investment opportunity of the decade, and far more exciting than following Warren Buffet and waiting for the US financial sector to recover. Incidentally he successfully played the silver market a decade ago and doubled his money in a short period, so do not rule out his also getting in on silver again.
Peter J. Cooper
http://arabianmoney.net/
Bobwins,
would you email me at :
lootfest@yahoo.com
I cannot write to you privately here.
Thank you
lootie,