Sunday, July 26, 2009

Trillions and Trillions of US Dollars

The Big Grin admits it:

"We're seeing numbers - trillions here and trillions there. And so I think legitimately people are saying, 'look, we're in a recession. I'm cutting back, I'm having to give up things - and yet all I see is government spending more and more money'."

It was just a few years ago that the word "trillion", never mind "trillions", was never mentioned regarding government spending. Now it is getting to be the norm. Right out of thin air is where they are coming from. Don't you wish you had a racket like a government protected private monopoly supplying US dollars; or any other government fiat token? There is one heck of a huge transfer of wealth going on.

"It is a sad fact of life that when you try to "run" a country on bread and circuses as the Imperial Romans did or on the modern equivalent which is the welfare state - it is hard to go on selling tickets to the circus when you run out of bread." - Bill Buckler, The Privateer

If you don't get the above, replace "real wealth" for "bread".

The way it used to be:

(right click on graphics to open in new tabs for larger view and read carefully)

Back then, the government could not get away with the type of spending it is doing now because people would demand the underlying asset of the currency (certificate). They would redeem the currency (upon demand) for the silver or gold. It was the limited supply of the redeemable asset that kept a lid on the supply of the certificates/currency. Now a days, what is keeping a lid on the supply of dollars? Nothing much except for politics.

Bill Buckler:

"The strain is starting to tell, though. While individual Americans wilt under the economic and financial burdens now being imposed upon them and as governments at all levels below the Feds in Washington hit the spending wall and start actually CUTTING, Mr Obama proposes to spend yet more "trillions here and trillions there". Once the governments and central banks of the world STOP lending to the US - and they literally cannot afford not to - the jig is well and truly up. Washington DC can then emulate the state governments, notably the one in California - or they can make use of what they have that the states do NOT - a central bank. If they choose this route, it will be outright printing and the US Dollar will dive off a cliff. If they cut spending, it will be a horrendous depression and the entire system will crumble. Either way, the US and the rest of the world is going to need a functioning money. And that's Gold."


Keep in mind that according to the BIS (Bank for International Settlements, the central bank for national central banks) there are about $1.4 quadrillion worth of derivatives (until they changed the way they count derivatives to get the total down to about $800 trillion) that still have to be dealt with. A lot more "shake rattle and roll" to come.


A nice collection of gold and silver:

(right click on graphic to open in new tab for larger view)

Got gold? Got silver?

Saturday, July 25, 2009

Gold, Silver and Other Atoms

Gold, silver and other atoms are protection from governments and their borrowings thus also protection from their deficits.

Many people believe that their government's increased borrowings will be paid in the future by their children and their children's children.

Not so. The increased spending by their government will be paid by them, usually in 1-2 years, in the form of higher prices. The US government is slowly being cut off from lending by the rest of the world. The rest of the world is getting fed up with lending to the biggest, baddest, record breaking debtor in the world that simply can't pay back all its debt and has no current intention to stop borrowing. The other reason is that the world economy has slowed down and therefore has little, or a lot less, savings to loan to the US federal government. No problem for governments with central banks. The US Treasury will simply borrow from the Fed. The US Treasury will create I.O.U.s out of thin air, send them over to the Fed, and the Fed will simply create US dollars out of thin air in return for the I.O.U.s and send them over to the US Treasury.

The more there is of something, the less it is worth. The more US dollars there are, the more of them people will want for the same amount of gold, milk, KWs of electricity, carrots, imported goods and services, gasoline, etc.

So, rising prices in the long run are a sign of the devaluation of the unit of account (of value) or unit of measure (of value) that something is being priced in; not a rise in the value of that something that is being bought.

Your taxes might not go up but your government has its butt covered with a central bank. You will pay higher prices instead of higher taxes. The point is: you will pay and you will not have long to wait to pay. Most people do not understand this therefore do not understand the importance of gold and silver as protection from what is going on inside the US right now. The US governments deficit has already hit the freakin 1 trillion dollar mark and will probably end the year with a deficit of around 2 trillion. This is borrowing with reckless abandon.


... further explained by Howard S. Katz at The Gold Bug

Now here is something that is very important to understand (and yet is understood by virtually no one). Every time the government runs a deficit (of any size at all) it creates money. This began with the origin of democracy (in England in 1689). The new democratic government wanted to spend money like water. As the old monarchical goverment had done. but unlike the old monarchical government the new democratic government was subject to the legislature, and the legislature was subject to the will of the preople. The people said "NO NEW TAXES."

So the new government invented the paper money system. The Bank of England was created (1694). It printed up paper money and lent this to the government. The paper money caused an increase in prices. Thus the people paid for the new spending via higher prices for the necessities of life when they had just refused to pay via taxes.

[or in other words that Howard Katz wrote in another piece:]

Many Americans understand that the Federal budget has to be balanced, but they do not realize how crucially important this is. They think that; when the Government runs a deficit, then the money needed gets borrowed from the wealthy people of the country and that it will have to be paid back by our children. But this is not true. Except for very small budget deficits democratic governments cannot borrow from their own people. An excellent example of this occurred after England became a democracy, in 1688. England immediately got into a war, and soon the King needed money to fight the war. He asked Parliament for a tax increase, but Parliament was getting pressure from constituents and voted down the taxes. (Although England at the time still had a king, he had little power; thus we consider the country a democracy.) So the King tried to borrow the money from the wealthy citizens of the country. However, his demand for money was so great that it pushed up interest rates to unacceptable levels. The King was not willing to pay those rates, and the businessmen of the country were also hurt by them.

Then a gentleman named William Patterson had an idea. He started a bank, the Bank of England. Patterson got some friends together and raised £72,000 in gold and silver. He then printed what are called bank notes (pieces of paper redeemable in gold or silver) to the tune of 16 2/3 times his £72,000, a total of £120,000, and he lent these bank notes to the King.

The King was delighted because he had gotten his money. The Parliament was delighted because they did not have to raise taxes. Patterson had seemingly created £120,000 out of nothing. However, the enemy spread nasty rumors that Patterson’s bank notes were no good. Holders of the notes rushed to the Bank of England and said, “Give me my gold/silver.” Patterson could not pay. His bank notes were indeed no good. But the Parliament appreciated Patterson because he had helped them out with the money for the King. So they passed a legal tender law. This said that the piece of paper upon which the bank note was printed was just as valuable as the gold and silver which it had promised (but now could not deliver). Essentially, the King got his money by simply printing up pieces of paper.

To cut a long story short, this same thing happened whenever any democracy needed to borrow money. An institution similar to the Bank of England (called a central bank) was set up, and it issued paper money (declared legal tender). Then the issues of so much money depreciated the value of the money, and general prices went higher. In the Civil War, for example, the U.S. issued legal tender greenbacks, and the average level of prices doubled. A similar thing happened in WWI.


Just the cost of the gigantic insane bureaucracy required to run the new proposed government take over of the medical industry plan could give a powerful kick start to hyperinflation, particularly since most governments have a problem organizing a dozen of donuts, and particularly since this government has a treasury that is literally broke and has been broke for some years.

Most people do not know it but just the proposal of this plan screams that people need gold and silver right now. Just the proposal of this plan shows how ruthless and insane TPTB (the powers that be) are.


Today's car repair costs 5-10 years from now may look like Model T era repair costs. Despite higher storage costs, a Model T in excellent condition would offer similar protection as gold and silver although its storage costs would be more and it would not be as easily convertible.


From ATLAS SHRUGGED, by Ayn Rand, page 387:

Rearden heard Bertram Scudder, outside the group, say to a girl who made some sound of indignation, "Don't let him disturb you. You know, money is the root of all evil—and he's the typical product of money."

Rearden did not think that Francisco could have heard it, but he saw Francisco turning to them with a gravely courteous smile.


"But money demands of you the highest virtues, if you wish to make it or to keep it. Men who have no courage, pride, or self-esteem, men who have no moral sense of their right to their money and are not willing to defend it as they defend their life, men who apologize for being rich—will not remain rich for long. They are the natural bait for the swarms of looters that stay under rocks for centuries, but come crawling out at the first smell of a man who begs to be forgiven for the guilt of owning wealth. They will hasten to relieve him of the guilt—and of his life, as he deserves.

"Then you will see the rise of the double standard—the men who live by force, yet count on those who live by trade to create the value of their looted money—the men who are the hitch hikers of virtue. In a moral society, these are the criminals, and the statutes are written to protect you against them. But when a society establishes criminals-by-right and looters-by-law—men who use force to seize the wealth of DISARMED victims—then money becomes its creators' avenger. Such looters believe it safe to rob defenseless men, once they've passed a law to disarm them. But their loot becomes the magnet for other looters, who get it from them as they got it. Then the race goes, not to the ablest at production, but to those most ruthless at brutality. When force is the standard, the murderer wins over the pickpocket. And then that society vanishes, in a spread of ruins and slaughter.

"Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion—when you see that in order to produce, you need to obtain permission from men who produce nothing—when you see that money is flowing to those who deal, not in goods, but in favors—when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you—when you see corruption being rewarded and honesty becoming a self-sacrifice—you may know that your society is doomed. Money is so noble a medium that it does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot.

"Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it becomes, marked: 'Account overdrawn.'

"When you have made evil the means of survival, do not expect men to remain good. Do not expect them to stay moral and lose their lives for the purpose of becoming the fodder of the immoral. Do not expect them to produce, when production is punished and looting rewarded. Do not ask, 'Who is destroying the world?' You are.

Thursday, July 23, 2009

The Fed Controls the Supply of US Dollars

The Fed Controls the Supply of US Dollars and therefore, sooner or later, the price of the US dollar. The Fed has only been around since 1913. It is not needed at all since it is the main culprit behind the Greater Depression that the US has entered into. This is something that should be done be a market(s), not a central bank. The issuance of money and currencies should be done completely by private enterprise like it mostly was done previously in the US. This was fundamental to the world history making amount of wealth that the US ***created**** (there is no fixed amount of wealth in the world) in its short little life. A central bank is part of central command of an economy and the actions of people. It looks like many/most people in the US did not learn anything from the implosion and break up of the USSR.

Ron Paul is interviewed (again) on the subject by MSNBC no less. He is one of the very few who can intelligently, knowlgebly and honestly talk about money, banking, economics and individual rights. Looks like some of the mass media are sensing that the citizen units are getting restless, catching on to the Fed, and are realizing that they (MSNBC) have to change their tune or they will look completely corrupt like the Fed or completely useless as a news source:

An example of what is in the White House, what is "leading" the US:
"We have to spend money to keep from going broke," says Joe Biden, a man who is out of his depth in the bath tub. - Bill Bonner

Another example of attempts at central command, in this case "one size fits all" of major parts of an economy. A schematic plan of the proposed federal government take over of the medical industry and the medical insurance industry in the US:

- 186.4 KB (190832 bytes) - Source:

It's Not An Option

By INVESTOR'S BUSINESS DAILY | Posted Wednesday, July 15, 2009 4:20 PM PT

Congress: It didn't take long to run into an "uh-oh" moment when reading the House's "health care for all Americans" bill. Right there on Page 16 is a provision making individual private medical insurance illegal.

IBD Exclusive Series: Government-Run Healthcare: A Prescription For Failure

When we first saw the paragraph Tuesday, just after the 1,018-page document was released, we thought we surely must be misreading it. So we sought help from the House Ways and Means Committee.

Still Not An Option

By INVESTOR'S BUSINESS DAILY | Posted Tuesday, July 21, 2009 4:20 PM PT

Health Care: Last week we said the reform plan moving through the House essentially outlaws the private individual medical insurance market. Critics said we were being dishonest. But we're standing by our story.


This is an attempt at full bore Communism at its finest. The exact opposite of what increases wealth in the world. Who the heck would want to be holding US dollars with this going on? The ignorant, the dumb, the "sharks that swim on the land" (- Jimmy Buffet). One thing is for sure, the share price of USA, Inc. (the US dollar) is going down. The US Treasury is broke and will probably be borrowing around 2 trillion dollars this fiscal year. At about the half way point, they have already borrowed about 1 trillion dollars. That is running a deficit of about 2 trillion dollars for this current fiscal year. The federal take over of the medical world inside the US would just make the situation much worse. It is complete insanity, ignorance, power lust and the blindness of arrogance.


A pretty good summation of the current actions of the Fed and US Treasury:

"While the mainstream media is trying to claim foreigners are still supporting our Treasury Markets a detailed analysis points in a totally different direction. I have maintained for the past few years that if you are worried about a currency crisis the proper portfolio allocation is T-Bills and Gold. Theoretically, the only risk in owning T-Bills is the devaluation of that currency. A proper allocation to Gold should balance that risk. According to the Treasury Capital Flow Reports, over the past 12 months the amount of Treasury Notes and Bonds held by Foreign Central Banks has remained relatively constant around $1.7T. At the same time T-Bill holdings have increased from $226B to $586B. Custodial Holdings of Foreign Central Banks at the Fed of GSE Agency and Mortgage debt has fallen from $968B to $807B. Meanwhile, according to the Federal Reserve’s Balance Sheet the Fed has sold all of its T-Bills and increased holdings of T-Notes and Bonds from $412B to $618B and GSE Mortgage debt from 0 to $639B. The Federal Reserve has taken over the risk in Long Term Securities and Housing Credit by printing as many $’s as necessary to support our financial markets. These $’s continue to flow directly to Wall Street and Foreign Central Banks who are redeeming their securities. China has made it clear they are diversifying into raw materials (including Gold) and energy. The European Union has stopped selling any significant amounts of Gold. It is quite clear to me Foreign Central Banks are preparing their balance sheets for the devaluation of the $. The Federal Reserve is monetizing the debt and equity markets (devaluing the $) each and every day and that process is accelerating. There is no reason to believe the risks of a currency crisis are receding."


Almost all people in the English speaking world do not realize that they are heading for a change in the world's monetary system from what they know it to be now. Having actual real money (gold, silver), not currencies or government fiat tokens is going to make a huge difference for those few who get what is going on in the big picture.

Tuesday, July 14, 2009

Outside Reversal Days for Gold, Silver and the HUI

Monday produced outside reversal days for the gold price, the silver price and the HUI:

Gold Price Chart (click the chart to enlarge)

Silver Price Chart (click the chart to enlarge)

HUI chart

An outside reversal day is a day when intra day prices went lower than the previous days intra day prices, and intra day prices went higher than the previous days intra day prices, and the closing price was higher than the prevous days closing price. In this case, it signifies high odds that the current down trend is over.


Protect yourself.

"The important thing now is to formulate a plan for when the wounded beast ceases the charade and takes the gloves off."