Jim Willie forecasts $50 silver
Usethe above link to subscribe to the paid research reports, which includecoverage of several smallcap companies positioned to rise during theongoing panicky attempt to sustain an unsustainable system burdened bynumerous imbalances aggravated by global village forces. Anhistorically unprecedented mess has been created by compromised centralbankers and inept economic advisors, whose interference hasirreversibly altered and damaged the world financial system, urgentlypushed after the removed anchor of money to gold. Analysis featuresGold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamicswith the US Economy and US Federal Reserve monetary policy.
Acouple of bright friends reported to me some overriding themes at thePDAC gathering in Toronto last weekend. Apparently, some surprise cameto them. They mentioned that more than a few analysts, writers, andspeakers still do not get it. They actually believe the situation withthe USEconomy and US banking system has begun to stabilize. That islike saying a college basketball player has Michael Jordan undercontrol, or a farmer has his Clydesdale horse under control, or amisguided King can call back the ocean tide, or a man has a hurricaneunder control as he clings to a roof rafter. The USEconomy has entered an accelerated phase of disintegration, while the populace has entered a new panic phase.The US stock market is under the microscope, and it just broke a keymulti-year critical support level. This article is intended to beconstructive, with a list of perceived meters and conditions, followedby a four-step foundation for a recovery. When finished reading thefour planks, one should easily conclude that no solution, let aloneattempt, is on the correct path or is in the works.
Thereforethe plan for individuals, who have been betrayed on a colossal scale,must defend themselves by exiting all assets and hunkering into cash. The betrayal lies at the feet of bankers, politicians, military brass, and corporate chiefs. Bythe way, cash is prescribed in that perfectly crafted document calledthe US Constitution. Gold & silver are the only forms of money thatcan legally satisfy debts public and private. That near perfectdocument has also been betrayed, with even the last president callingit a ‘mere piece of paper’ incredibly. The financial problems of thenation took deep root with the Vietnam War and the subsequentabrogation of the Bretton Woods Accord that had forged the US$-Goldlinkage. The analysts, pundits, bankers, and politicos seem to havetotally lost sight of this basic fact. Their deep error, along withprofound corruption, will be centerpieces in the next chapters writtenin history. My rational and considered belief is that gold, as well as crude oil, will be anchors to the next global reserve currencies.What better route to stabilize both financial and commercial pricesystems? Those who believe that the USDollar will prevail and survivethis turmoil as the global reserve currency are precisely as incorrectas those who believed the US banking system could survive the mortgagedebacle as it unfolded. We are witnessing a long slow drawn-out deathexperience for the USDollar, liquidation of the USEconomy, to befollowed by a default by the USTreasury Bonds. Duringthe panic phase, the response in the gold & silver prices will beprofound, with advances to date only a prelude to a march to $2000 goldand $50 silver.
CRESCENDO AFTER ETHICS ORIGINAL SIN
Thetopic of fraud has clearly been in the news often in the last twoyears. The mortgage fraud was for a while covered up by its framing asa subprime problem, but no longer. The counterfeit of Fannie Maemortgage bonds, estimated at well over $1 trillion, has beenessentially kicked under the rug on USGovt hallways following itsnationalization. The insider trading by Goldman Sachs is an example ofoutstanding and impressive executions, perpetrated with completeimpunity. The maze of unscrupulous, devious, and insidious fraudulentbusiness units of JPMorgan is worthy of a 500-page chapter in the USfinancial history treatise, someday to be written. See the completedistortion of usury costs (interest rates kept low) by JPM, with such avolume of Interest Rate Swaps that was sufficient to run the BondVigilantes out of town. Skewed cost of money is the foundation forspeculative bubbles. See the management of USTreasury Bonds by JPM onbehalf of the Federal Reserve, along with the $2.2 trillion that theysold above and beyond the officially stated USGovt issuance ofUSTreasury Bonds. That is called counterfeit evidence, the records forwhich were lost in the third building at the World Trade Center. Seethe management by JPM of the Bank of Baghdad. Twice as much money ismissing from the Iraq Reconstruction Fund than was stolen by BernieMadoff, up to $100 billion being estimated. And never overlook thefinancial tentacles that extend from Afghan operations on thecontraband side, to the Bank of Baghdad as the clearinghouse.
Thequiet climaxes of fraud are seen with the Madoff Ponzi Scheme and otherminor cases. If you think that authorities are still looking for whereMadoff hid the stolen money, then you must believe that the Wall Streetmission is to assist in the capitalization process for US industry. Themajority of the Madoff funds are safely placed in the same location asmuch of the Wall Street ill-gotten gains. My sources report thatlocation to be banks within the tiny ally coastal nation north of Egyptand south of Syria, which with the urging of the last Administration,removed all extradition laws in recent years. Traceback to find the original sin of the ethics violations, and you shouldfind your feet squarely at the abrogation of the Bretton Woods Accordthat cut the linkage between the USDollar and gold. This is an ethics violation climax of historical proportions.
Thepathogenesis of breakdown must join with fraud during the advance offoreign debt ownership, which resulted in lost sovereignty. The hiddenplacation of foreign creditors results in hidden policy that does notcater to national interests of the United States anymore. The breakdownthat comes will enable foreign creditors to gather a wide swath of USproperties (residential homes, commercial property, factories, etc)from USTreasury Bond and USAgency Mortgage Bond conversion to hardassets. The teamwork, synergy, and innovation at the core financialengineering had been concentrated in what can be described at best as anational Ponzi enterprise of clean industry for the next millennium,and at worst on a grand network of fraudulent financial enterprise thatincludes fraudulent bonds, counterfeit bonds, narcotics, and armsdealing. The response in the gold & silverprices to recognized official and private fraud will be profound, withadvances to date only a prelude to a march to $2000 gold and $50 silver.
STOCKS ARE THERMOMETER
Themajor indexes of the US stock market are in the news daily, and viewedby the public as perhaps the most important concurrent signal of thecrisis. Technical chart analysts warn that the breakdown below the2002-2003 support levels sounds an extremely loud alarm, paints a largebillboard warning, and should be taken seriously as a dire development.Novices might not recognize the pattern below in the S&P500 index,but experienced analysts surely do. It is a long-term DoubleTop Head& Shoulders reversal pattern. It is a Mother of Reversal Patterns. Its base is roughly at 775, its top at 1550, which indicates a target of nearly zero.Not only are private wealth accounts being cut down but pension fundsas well. Individuals invest much more in stocks than pension funds,which are diversified into bonds and commercial property. All assetgroups are suffering. The public has begun to respond in minor panic tothe stock market declines, as private telephone calls testify. Expectanother decline of 25% to 35% on both the S&P index and Dow JonesIndustrial Index. With each passing month comes more specific evidenceof economic deterioration or disintegration, coupled with mammothadditional bank losses. They push stocks down. The key drivers seem tobe job loss and big financial firm loss. See the history making $100billion AIG annual loss, the ongoing hemorrhage at Citigroup and Bankof America, the gigantic extensions of cash from the USGovt to bigbanks.
Theclaptrap propaganda coming from Wall Street centers on price multiplesagainst earnings. The problem is that earnings are evaporating, and thePE ratio argument is empty. The response in thegold & silver prices to the deep stock declines, cratered pensions,and loss of life savings will be profound, with advances to date only aprelude to a march to $2000 gold and $50 silver.
RETAIL IS THE BAROMETER
Over80 thousand retail stores closed in 2008. The forecast from expertcorners is for another 120 thousand retail shutdowns in 2009. Numerousretail chains have gone out of business, with the list expected to morethan double in 2009 and 2010. Recall retail consumption had been theboasted foundation of the USEconomy, the engine of growth to the globaleconomy, by inept clueless hack economists for at least a decade. Thenational guidance from the economic counsel staffs continues to utterheresy that spending is healthy, when sound economic reason dictatesthat investment in productive enterprise is the key to any solution.This blight is very difficult to hide from the American public, as theypass the partially and completely shutdown malls, mini-malls, and smalloffice strip malls during their daily lives. The feedback loops areindeed vicious, as reduced spending means job cuts, even though theyare low-paid jobs. Bear in mind that the construction and operation ofretail shopping malls does not constitute investment in an economytoward its productive capacity, but rather creation of a pathway toliquidate and spend home equity on the path to foreclosure andbankruptcy. In my view, retail serves as a barometer on what to expectin the near term future. The crisis collapse in the car industry echoesloudly the retail woes, as annual sales decline range from 40% to 50%per brand. The response in the gold &silver prices to the blight in shopping malls, retail crash, and carcollapse will be profound, with advances to date only a prelude to amarch to $2000 gold and $50 silver.
FORECLOSURES ARE THE LEADING INDICATOR
In4Q2008, the rate of foreclosures rose by 53%. No stability whatsoeveris evident. The only good news is that the rate of FC is no longer 100%on an annual basis. So a deceleration is in progress. Maybe in oneyear’s time, the FC annual growth rate will only be 30% to 35%, withsome luck. The Mortgage Bankers Assn reported today that the mortgagedelinquency rate rose by two percentage points to 7.88% by year end2008, and the foreclosure rate rose to 3.3% also. The total in DQ or FC rose from 10.1% in 3Q2008 to 11.2% in 4Q2008.So one home loan in nine is late or dead. Also, an estimated 20% ofAmerican homes are in negative equity situations, with loan balances inexcess of their home values. As the delinquencies convert toforeclosures, the bloated home inventory for sale will remain atelevated levels. In fact, they are grossly under-stated, since banksare rotating foreclosed properties on their books in order to avoid afurther flood on the bloated condition. REO properties by banks are ahot topic.
To be sure, a fewdozen or a few hundred or perhaps even a thousand home loans mightreceive actual aid by the USGovt. The number of home loans to receivesome form of official aid is proposed to benefit one in nine,coincidentally. Time will tell to what extent any new legislation onso-called ‘cramdowns’ takes root. Bankruptcy judges might soon have thepower to dictate to a bank that it reduce home loan balances, seeking alevel of affordability relative to proved income. The home loan aid process is incredibly slow, while the pace of economic decline is accelerating.Be sure to know that households in foreclosure, or in delinquency, oreven in chronic insolvency from an under-water home loan do not spendmoney, and generally cut back on expenses, even enter a bunkermentality under siege. The response in the gold& silver prices to the household insolvency and foreclosure processwill be profound, with advances to date only a prelude to a march to$2000 gold and $50 silver.
JOBS ARE THE LIGHTNING ROD
Nothingcaptures the attention of the public like the reports on job loss.Sudden income loss is often devastating. The continuing claims forjobless in the official aggregate records eclipsed the 5 million markin late February. When the USGovt announces back-to-back months of over500 thousand (half a million) job losses, the public will surely noticeand scream from rooftops. Of course, the number is probably worse,since official agencies are urged to put the best face of their tiltedfigures. In the coming months, expect the number of monthly job losses to surpass the one million mark.As that occurs, the national level of concern will surely morph intosome form of panic, with disorder to follow, and civil disobediencerampant. Calls for extreme action by the USGovt will be made, as thoughthey control any solutions at all. In fact, look for their collectiveactions to greatly aggravate the national economic ills, with timerelease to occur down the road. After all, they sell hope. Theresponse in the gold & silver prices to horrendous job loss will beprofound, with advances to date only a prelude to a march to $2000 goldand $50 silver.
POLITICIANS REPEAT HISTORICAL ERRORS
Thehoneymoon is almost over for the new president. His cabinet staff comesfrom the same crowd within the establishment responsible for thefinancial collapse. They just wear different colored jackets, comingfrom the Clinton Camp instead of the Bush Camp. In my view, they arealmost all turncoats to the nation. The federal budget for next yearhas centerpieces of tax increases (up 33% on income, up 100% on capitalin the form of dividends), removal of some tax deductions for homemortgages, and a $20.4 billion defense budget increase. Obama evenmentions measures that harken protectionism. Some of these main itemsare in a state of flux, as the errors of their ways are beingre-evaluated. One should not increase taxes during a recession. Oneshould not tax capital during a capital liquidation. One should not taxenergy production during price instability. One should not discouragehome purchase during a housing bear market. One should not increasemilitary spending, when money is desperately needed for domesticpurposes. These are classic political errors that will render additional harm to the current economic and financial crisis.The Glass-Steagal Law to prevent collapse of the financial system wasremoved late in the 1990 decade. Dominos can now fall, as it is joinedat the hips from banking, stock brokerage, and insurance. Its scrap wasa Pet Project of former Treasury Secretary Robert Rubin, again thePoster Boy of financial failure and fraud (see his gold leasingmulti-year project). His was the stolen 1990 decade of prosperity. Thedamage is therefore certain to run across the primary financial sectorsfor a long painful sequence in time. The insurance firms are next tofall. Watch Prudential, MetLife, Hartford, and Lincoln.
History is being actively ignored. “Whatexperience and history teach is this: that people and governments neverhave learned anything from history, or acted on principles deduced fromit.” These words were spoken by Georg Wilhelm Friedrich Hegel(19th century German philosopher). Few observers seem to realize thaton the spectrum, the distance between Fascism (battle cry of last eightyears) and Socialism (battle cry since inauguration) is remarkableshort. Socialism shares the misery, as the successful are forced to payfor the failures, the corrupt, and the lazy. To construe thatnationalization and absence of profit motive represent movement in thedirection of communism seems very much correct. The Politburo at the USFederal Reserve has done its job since irrational exuberance took root.The response in the gold & silver prices toUSGovt policies that amplify the damage to the national condition willbe profound, with advances to date only a prelude to a march to $2000gold and $50 silver.
BANKERS FUND FAILURE & FRAUD
Forover a year, a clear trend has been set in stone. The USFed andUSCongress (aid & abet) have been on course to redeem fraudulentbonds, to fund almost exclusively the largest banks, and to deny creditsupply to the mainstream. Unwritten orders were given by the USFed andGoldman Sachs henchmen who dominate the Treasury Dept for banksreceiving TARP funds not to lend, but rather to acquire smaller banksin distress. All this while the regulators have been obviously givenorders to sit on their hands or to aid the acquisitions and mergers(see the FDIC and Bair efforts). By the way, the FDIC fund is almostempty. The inescapable conclusion is thatproper credit supply to profitable and promising enterprise is beingobstructed, thus strangling the USEconomy. The nationalizationof AIG and Fannie Mae was more designed to hide credit derivativeexplosions, to bury a mountain of counterfeit bonds, and to prevent ashutdown of perhaps over one hundred thousand businesses. The AIGconglomerate insures 70k individuals, over 100k businesses, and has 74million customers. Without insurance or bonded coverage, manybusinesses would have been forced to close operations. Theresponse in the gold & silver prices to misdirection of credittoward failure and fraud, and to exclude the healthy promise of privateenterprise will be profound, with advances to date only a prelude to amarch to $2000 gold and $50 silver.
A GENERATION OF LOST WEALTH
Muchtalk has come of a lost decade of wealth. A hint has come in the lastfew days of a lost generation of wealth, a cry which will reverberatevery soon. This is real. This is accurate. This is a legitimate claim.My forecast is for housing prices to fall at least to those seen in1988-1990, maybe lower. The stock market indexes could easily fall tothe same levels they showed during those years, based upon powerfulmomentum and soured psychology. One should really examine the rootcauses and likely consequences from diverse liquidation amidst economicdeterioration. The USEconomy can easily bedescribed, as a result of unchecked credit growth combined withfinancial engineering hidden by a shadow banking system, to have beenlittle more than a phony expansion of a national bubble for a fullgeneration since that important 1971 year, when the USDollar broke tieswith gold. The palpable risk is for much of the accumulatedwealth for perhaps over 30 years to gradually be lost. If so, then afailure of state is assured. If so, then the national debt in the formof USTreasury Bonds cannot possible remain viable.
The two best single indicatorsinmy view, among numerous, for judging the prospect of such calamitiesare these. 1) The USTBond credit default swap has risen from a mere onebasis point a few years ago to a full 1.0% now. That is a 100-foldrise, and ranks among the worst in the world, along with the UnitedKingdom. 2) The BKX bank stock index has broken down in repeatedfashion, the most recent being a month ago, fully forecasted by theJackass. Today the Citigroup stock fell below $1 per share. The banksector leads the stock market lower, and confirms the breakdown belowcritical support. The response in the gold& silver prices to perceived decades of lost wealth will beprofound, with advances to date only a prelude to a march to $2000 goldand $50 silver.
1ST STEP IN RECOVERY – REMOVAL OF WALL STREET
Theelite power center is still in charge from Wall Street. Their primaryobjectives are to avert a credit derivative meltdown, to preventexposure of a bankrupt dead banking system from proper accounting, andto raid the public till (more bailouts for fraud) as much as ispossible. The USFed still refuses to reveal usage of the TARP fundsfrom last autumn, in full defiance. That Goldman Sachs executivescontinue to appear during official US Dept Treasury announcements onpolicy is a travesty. TARP fund disbursement, along with control ofsurly Congressional members, was the job of Goldman Sachs henchmenemployed as underlings at Treasury. The travesty continues. The WallStreet syndicate remains in firm control of Treasury. They should beprosecuted, imprisoned, and ordered to give restitution to fraudvictims. Instead, they remain in control. The official Stress Tests forbig banks constitute yet another charade to endorse the channel ofpublic funds into private banks. The responsein the gold & silver prices to continued syndicate control ofpublic funds will be profound, with advances to date only a prelude toa march to $2000 gold and $50 silver.
2ND STEP – END FOREIGN WARS
Warcosts generally are horrific and serve as principal cause for massiveindebtedness to the United States. This has been the case since theVietnam War. Hundreds of billion$ are annually allocated withoutquestion to military budgets, war costs, foreign aid in support ofmilitary objectives, and elsewhere, all in crippling fashion. Suchchronic spending and industrial diversion has come for a generationwithout debate. The next annual budget includes yet another sizeableincrease for the defense budget. The war in Afghanistan can be best described as Waterloo with a turban headdress.The emphasis at the national level for construction and destruction hasbeen centered on war initiatives, with shockingly little awareness ofthe ultimate millstone placed around the national neck for the UnitedStates. Iraq Reconstruction Funds have recently been reported to be the object of between $50 and $100 billion in missing funds!Yet this news item was buried on back pages. This has been a wellspringof corrupt slush funds that even touched Henry Kissinger’s hands. Thereconstruction should be focused within the US. Theresponse in the gold & silver prices to misallocation of prioritiesand funds toward war will be profound, with advances to date only aprelude to a march to $2000 gold and $50 silver.
3RD STEP – TRUE INFRASTRUCTURE PROJECTS
Muchtalk has come for infrastructure projects that would fortify theUSEconomy enough to provide traction toward recovery and sustenance.Jobs would come on such projects. To date, the projects are somethingof a joke. Some actual measures on alternative energy seem like atrifling trickle. Look to the Obama Stimulus package to see out ofevery $1 in funds, we have 14 cents of pork and 11 cents of stimulus,with a lot of political garbage typical of the last twenty years. Nochange in makeup and mix. In my view, a high-speed railway from OrangeCounty California to Las Vegas Nevada does not qualify as manifestedcommitment to infrastructure. What? The USGovt subsidizes shuttles toand from Disneyland and the Vegas casinos!!! Thousands of bridges andtunnels and port facilities are in dire need of repair. In my formerhometown of Pittsburgh alone, several bridges are shut down as ancientand a hazard. Pipelines for water, sewer, and energy supply are needednationwide. Expansion of airport facilities is sorely needed, likeconcourses, jetways, and air traffic control centers, not security ratmazes. The infrastructure should include farms to harness the wind andsun, even to produce hydrogen gas from ocean water. Such initiativesare nowhere to be seen, as the same old same old junk pork and garbageand home earmarks continue to prevail. Theresponse in the gold & silver prices to infrastructure waste andpropaganda will be profound, with advances to date only a prelude to amarch to $2000 gold and $50 silver.
4TH STEP – FACTORY RESTORATION
Anyattempt to revive the nation with job creation and reconstruction wouldquickly expose the majority of observers (except those who continue tosleep) that the United States has an industrial base that is missing in action against a backdrop of a war economy.The better description is abandoned, dispatched, and forfeitedindustrial base. Unless and until the USEconomy reinstalls its factoryfoundation, returns significant portions of it from Asia (especiallyChina), and ensures adequate training to professional staffs, thenation cannot conceivable recover. It is that simple, mainly becausethe challenge is not to put chunks of money in people’s hands to spend.The challenge is to enable people to earn legitimate chunks of money to spend from viable jobs.For a decade, the nation depended too much upon raiding home equity,upon jobs centered on the housing and mortgage industry, and uponextracting cash to spend on whatever they wished, whether productive,necessary, frivolous, or wasteful. The monumental and highly visibledestruction, dismantling, and deterioration of the US car industryhighlights the damage done better than any words or graph.
TheUSGovt must encourage job creation on the Homeland soil, for factories,reconstruction, and alternative energy pursuits. The Dept of HomelandSecurity seems much more intent on fencing the zones soon to morph intowasteland. The industrial base is the most important structure to anational economy, not its financial sector. The US has had itspriorities backwards for almost two decades, putting financialengineering and its clean industry ahead of factories and their dirtyeffluent. The smokestacks of Wall Street have poured out noxious gasesthat finally have rendered crippling damage. Theresponse in the gold & silver prices to continued factor ruin willbe profound, with advances to date only a prelude to a march to $2000gold and $50 silver.
Let’sbring back recycling initiatives, which are so productive. Here is afactoid worth thinking about. One metric tonne of recycled paper usagesaves an average of 5 large trees, saves 30 thousand liters (~7100gallons) of water, and requires 60% less energy for pulp processing.Conservative is a great element to fit into the industrialrevitalization of America.
THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.