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Failing Currencies, Failing Economies And The Role Of Silver And Gold

Oct 23 2013
Biz Bluetree

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)

Most of the major economies of the world are insolvent. Banged up badly and on life support. The sovereign stewards of these troubled economies feel their only option is to create more money in an attempt to resuscitate a patient that's on the verge of crossing over to the other side. After all, it's not their money. The citizens are the ones strapped with paying it back.

Anyone who manages a household budget knows that handling family debt by creating more debt on top of it is a sure recipe for financial suicide. This is why people who manage successful home budgets recognize that they have a debt limit. They control discretionary spending through difficult times, though sometimes it hurts, prudence pays off.

Why then do elected officials and their appointed central planners ignore debt?

When you look at the United States, the Eurozone and Japan for instance, what do you see all of them having in common? For one, they are all three major world economies in a world of trouble. Each use easy monetary policies and fancy dance steps to create and not inflate (too much), and each of them employs twisted rhetoric to convey a message to their masses that everything is going to be fine. The recovery is underway.

One of the above three is different though. One stands alone and sets the tone for the others. That is of course the nation in control of the world's reserve currency. The U.S. President even said, when introducing Janet Yellen to the media, all nations' central banks follow the Fed.

The U.S. Federal Reserve who now, because of the recent soap opera in Washington, dare not even entertain a tapering of quantitative easing. In fact QE will likely increase to keep the economy on track and the stock market buzzing like it's on drugs. Now, many nations around the world are having second thoughts as to the soundness of U.S. monetary policy and its reserve currency.

Don't you question the exponential increasing of the federal debt, the Fed balance sheet and the enormous money supply that keeps growing and growing, and growing?

Am I seeing this correctly?

The Euro has gained on USD 11% since the summer? The Euro is far and away not the model of sound money, nor does the Eurozone enjoy a booming economy - quite the opposite. So what's at play here? Has the race to the bottom already begun?

All of the apparent calamity involving USD, the Euro, yen and so many other currencies - as well the fragile nature of world economies, and the lack of faith in those with control begs the question - where is the safe haven?

It has always been common thinking that safety from the storm was found in gold and silver, so why then haven't those metals responded with sustained rallies? And, given that fact, is it any wonder why all the hushed talk of manipulation of gold and silver prices is becoming louder?

None of us know how any of this is going to play out. But, I for one will put my money on the metals. Now, before you start thinking my tin foil hat may not be on straight, let's read what some have had to say who posses a clearer understanding of the macro economic view than I.

Egon von Greyerz, founder of Matterhorn Asset Management of Switzerland, told King World News on October 19, 2013:

"In my view the real move in the metals is now starting. The collapsing of many major currencies, including the dollar, euro, and the yen, will be directly reflected in the value of the precious metals over the coming year."

"The [U.S.] debt ceiling uncertainties have only delayed the autumn rally in gold and silver, but I now believe the metals are off to the races. 2014 will be a very good year for gold and silver and that's just the beginning. But 2014 won't be a good year for the world, and that's why it's so important to preserve wealth by holding physical gold and silver and storing it outside of the banking system. This will help people survive the coming financial chaos."

That is a powerful statement by a highly respected person in the know. Should we dismiss him?

And what of the remarks made by Dr. Philippa Malmgren, President and Founder of Principalis Asset Management and former Special Assistant to the President of the United States for Economic Policy, who was quoted in an earlier writing saying: "major investors know that manipulation of the gold market is a fact of life."

Dr. Malmgren furthered with, the magnitude of sovereign debt is so great it cannot be paid down. It "will have to be defaulted on."

And is it a coincidence that China is piling huge amounts of gold into its vaults? Do the Chinese know something we don't? Or see something we choose not to see?

Everyone knows, and for the most part respects, Canadian Billionaire and Chairman of Sprott Asset Management, the custodian of Sprott Physical Gold Trust (PHYS) and Sprott Physical Silver Trust (PSLV), Eric Sprott. Here's what he had to say also on October 19, 2013, at the end of a week the US Dollar index closed below the key psychological level of 80:

"Most of the things I think are going to happen are all based on facts. […] look at the facts on physical demand for gold and silver. […] look at the facts on government deficits, and you have to take yourself to where it's going (the end game). And whether it happens in a year or two, it's going to happen".

"We've had so many false starts and promises. 'The economy is going to be great in 2010,' and it's not. 'It's going to be great in 2011, 2012, 2013,' and it's not. […] we are actually regressing, even though they (central planners) don't want to admit it, because the numbers are all manipulated in one way or another. […] gold will be accepted as the asset to back a (major) currency. And the currency with the most gold behind it, which I suspect is already the Chinese yuan, and growing rapidly, will be the dominant currency going forward. How can somebody […] buy an extra 25% of the (entire global) market at that same time the price falls by 30% or 40%? It's just totally ridiculous that it would ever manifest itself that way. If they bought 25% of the oil, wheat, or the corn markets, the price would not be going down."

Ouch! Did anyone read between those lines?

We really don't know who is to blame for the suspected gaming of the PM markets, but it would seem pretty clear they are not alone.

And I know most everyone is tired of reading "this and that" ad nauseum about a certain very large commercial bank that finds itself in the eye of so many storms, and fined so many times by the CFTC. Please pick one of hundreds of headlines currently circulating in the media and read for yourself - they've admitted to "wrong doing."

Sound advice remains: buy and hold silver and gold outside the banking system. It's priced very inexpensively right now.

In conclusion: What do you think of the people quoted above; Gruyerz, Sprott and Malmgren? Do you think they are conspiratorial crackpots? I think not. What I do think, with deep conviction, is that they see what many among us choose not to see or are unable to see.

Is it time we open our eyes and open our minds? Or are we willing to pay an ultimate price?

http://seekingalpha.com/article/1764722-failing-currencies-failing-economies-and-the-role-of-silver-and-gold