Tuesday, January 22, 2008

Gold and Silver Are Protection From Dangerous People

The most dangerous people in the world are cornered politicians and their high level bureaucrats. Gold and silver are your major protection from them. They do not plan way out into the future in order to create wealth. They only plan short term to increase power or to hang onto power which requires the consumption of wealth, usually other people's wealth.

WASHINGTON, Jan 18 (Reuters) -
... it [the economy] was not in danger of stalling."

"This is not an emergency. There is an urgent need," Paulson said on NBC television about rapidly-moving plans to develop a rescue plan for an economy hit by a housing crisis, a credit crunch and soaring oil prices. President George W. Bush is to outline his plans for a stimulus package later on Friday.

"The long-term fundamentals of our economy are strong," Paulson said. "We believe the economy is going to continue to grow slowly here, but it has slowed down and the risks are to the downside and the President is very focused on taking actions quickly that will give a boost to our economy as soon as possible this year."

They have to be in a panick to be contradicting themselves in the same paragraph several times in a row. Watch out.

In other words there is a danger of stalling [reality is a crash is coming], there is an emergency, the long term fundamentals are as weak as any worse time in the past. There will be no real boost to the economy. There will be tons of smoke and mirrors.

Their fix is what caused the problem in the first place, more US dollars and the equivilent in debt. Their fix will accelerate the problem. At the moment the plan in the US is to give back some paid taxes to tax payers hoping they will spend it to prop up the economy. The problem is that the governments in the US have already spent their tax receipts and more from their borrowings. They will now have to borrow even more (more dollars get created out of thin air) to give these rebates back to the tax payer, thus increasing the problem of stagflation: rising prices with a declining economy.

The US Treasury/Fed will create trillions of dollars if necessary to keep financial institutions functioning, and to try to keep US equities from crashing despite that the Dow will probably end up down around 3,000. Initially these dollars go to the financial institutions but end up getting out into the world's economy, thus increasing the pressure of entities around the world to get rid of them.

Other governments are increasing their token supplies also. Reserve assets of other central banks climbed $1.30 trillion (27%) in 2007. Or, about 50% in 2 years. Most central banks around the world, for all practical purposes, are out of control. World wide, this has never happened before. To a large extent, this is due to the final disconnect at Bretton Woods in 1971 of all government fiat paper and digital bits from the discipline of gold.

Look for a major change/rebuild of the world's financial system in the near future, 2010-2020. There is big time history being made right here and now. Your major protection from the larger moves that are coming is real spendable money, gold and silver. Not something (digital bits) that are trapped on someone else's hard drive.

In the mean time, foreigners are buying up US assets with unwanted US dollars. The US dollars are returning home, ultimately jacking up prices for daily essentials of life, thus threatening life itself in the US.


“Our modern shadow banking system craftily dodges the reserve requirements of traditional institutions and promotes a chain letter, pyramid scheme of leverage, based in many cases on no reserve cushion whatsoever. Financial derivatives of all descriptions are involved but credit default swaps (CDS) are perhaps the most egregious offenders. While margin does flow periodically to balance both party’s accounts, the conduits that hold CDW contracts are in effect non-regulated banks, much like their hedge fund brethren, with no requirements to hold reserves against a significant “black swan” run that might break them.” -

Bill Gross, PIMCO
Investment Outlook
Jan. 20, 2008

Mr. Gross isn’t some poor schmuck down in Peru whistling into the wind. He just happens to manage one of the largest, if not the largest, bond funds in the world and it’s stuffed full of other people’s money. I often read his work because he’s honest and that is a rare quality in today’s world. Note that he is calling derivatives a pyramid scheme, strong language to say the least, and quantifies it at US $500 trillion

dollars, almost ten times the entire asset base of the global banking system. In defense of the system, some would say these bets between risk seeking and risk avoiding parties were entered into by consenting adults who knew what they were getting into. I couldn’t disagree more. For those of you who don’t know how a lot of big deals are done, I’m going to enlighten you. The president of Goldman Sachs calls up the president of Credit Suisse and tells him that he’s got a “can’t miss” deal for him. The president of Credit Suisse tells him to fax it on over, looks at the cover, sees its issued by Goldman and bears a AAA rating from Standard & Poor’s, then picks up the phone and orders some subordinate to get it done. The whole process takes ten minutes and is based on faith. The president of Credit Suisse isn’t going to read the entire one hundred page prospectus because it’s written by lawyers and he isn’t going to understand it. In fact, it is expressly written not to be understood and thereby considerably increasing the chances that Goldman can escape blame should something go wrong.

Recently Credit Suisse came out and said that they can’t quantity their losses. By making such a bold statement, Credit Suisse is confirming the pyramid scheme label applied by Mr. Gross as are Merrill Lynch and Citibank when they write off a combined US $30 billion and can’t deny that more write-offs won’t happen next quarter. In reality you’ll see that US $30 billion is just a very small tip of a very large iceberg. That iceberg has now collided with the economy and has done irreparable damage. In an effort to calms investors, Mr. Bernanke gave two poorly received speeches this week and indirectly begged for help from President Bush in the form of stimulus package. The markets had high hopes Friday morning as the futures shot up almost 160 points before the President’s speech. As soon as the details of the highly touted plan were released to the public, the air began to leak out of the balloon, and everyone went home disappointed. Now all that is left is the Fed rate decision at the end of the month. It is a given that they’ll cut 50 bases points and there are people calling for as much as a 100 bases point cut. What no one is telling you though is that they can cut all they want and it just won’t matter. Some months back, there was a very small window of opportunity to postpone the inevitable one more time. As so often happens when opportunity comes knocking, no one answered and the window is now firmly shut.

The problems are now floating to the surface and they are being felt all over the world. Northern Rock (UK) and Credit Suisse are not isolated events; they are just the beginning. A significant portion of the US $500 trillion in derivatives is held by foreigners, and they are just now beginning to wonder what they got themselves into. Usually when we have a scandal the SEC and the Department of justice can’t wait to beat the door down and assign blame. The same holds true with the Congress. This time around they are all conspicuous by their silence. Why? Simply put, people who live in glass houses cannot be seen throwing stones. By that I mean that the Congress and the SEC, and by implication the DOJ, are all to blame. In fact, I’ll go so far as to say that they are the problem. In the end, they’ll find some poor middle management fellow and pin the whole mess on him but somehow I don’t think that will fly this time around." -

DTAnalysis SAC
Lima, Peru

Since the US is in worse shape than it was before the Great Depression of 1930-1945, this Great Depression should be worse than the last one.

One of the major ways for people to protect themselves from dangerous people is to have plenty of gold and silver, actual real spendable money that has no liability attached to it.

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