Economic Collapse

“There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.”
- John Adams, 1826

Dear readers,

Why is gold ascending in price? Why does it cost you more to go out for lunch today than one year ago? If you understand that gold is money that cannot be printed at will by Central Banks and you look at this chart, then you will be able to answer the questions above.

Source: http://research.stlouisfed.org/fred2/series/BASE

Note also that according to the Fed, we are not in a recession. But then again, according to Ben Bernanke, gold is not money. Now after you watch that clip, read this:

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. …This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.
- Alan Greenspan

Ben Bernanke is on the other hand doing exactly what Greenspan told the world in 1997:

[…] A government cannot become insolvent with respect to obligations in its own currency. A fiat money system, like the ones we have today, can produce such claims without limit.
[…] Thus, central banks are led to provide what essentially amounts to catastrophic financial insurance coverage. […] If the owners or managers of private financial institutions were to anticipate being propped up frequently by government support, it would only encourage reckless and irresponsible practices.
[…] On the other hand, if central banks effectively insulate private institutions from the largest potential losses, however incurred, increased laxity could threaten a major drain on taxpayers or produce inflationary instability as a consequence of excess money creation.

Listen here to an interview Eric King of KingWorldNews.com did with Jim Sinclair in 2009 discussing this quote. Key words: excess catastrophic money creation without limit.

I advice you to watch what the Fed is doing, and listen with critical ears to what they are saying. The Fed is not only managing monetary aggregates, they are managing the perspective on economics (what Jim Sinclair calls “MOPE”). In essence they are saying one thing, doing another and at the same time understanding the third: Gold is money. Has always been. And will continue to be until we come up with a system without money.

We are at a point of critical systemic risk, as James G. Rickards told the GATA audience in London earlier in August. You should still be in wealth protection mode, and not in trading mode, now more so than ever.

Best Regards /Johnny

Dear readers,

On 16th February 2011 I wrote you the following on gold and silver:

In 2011 I see silver at at least 50 USD/Oz and gold approaching 1800 USD/Oz. Probably this is too low. Friends and I have discussed that what we see happening is transpiring much slower than we anticipated, however I do feel 2011 will be the year when gold and silver becomes mainstream. If I am correct the above fiat price targets will be proven wrong on the low side.

At that time gold was trading at 1,371 USD/oz and silver 30.63 USD/oz. Silver exploded to the upside and almost hit 50 in late April before correcting down back almost to that same level of 30 a few days later in early May. Today, silver is again trading above 40 on its move back to test its nominal all time high at about 50. Gold has during the last couple of weeks had a similar ride as silver did earlier this year, moving sharply up and surpassing the 1,900 level. And like silver, gold had a healthy correction down to 1,700 and change just a few days ago. Today, at the time of writing, gold is trading at 1,820 USD/oz, matching my target quoted above.

Now, before you get impressed, let me be clear and state that I based the above on other peoples work. People that are far more intelligent and better researched than I am, like the regulars at KingWorldNews.com, such as Dan Norcini, Jim Sinclair, Ben Davies, James Turk, John Embry, Eric Sprott and others like David Morgan. However, I do try to compile many different predictions and boil them down to averages and then applying my own macro views on things. By the way, I often post links to these experts at the RealMoneyTracker.com blog.

However, like I wrote: If gold and silver becomes mainstream, I said I was going to be wrong. It’s time to re-evaluate targets for 2011.

Financial media here in Sweden have finally, after a +10 year bull market, started publishing articles about the fact that gold could move even higher. Of course, you all know gold and silver are moving higher, but my point is that the popular media now at least quotes bulls, not only bears. This is a clear sign that we are now entering a new phase in this bull market. Thus, the greatest gains are still ahead of us, and so is the time of ever increasing volatility, making predictions even more difficult to make. Not to mention the increasing sovereign debt crises and the political issues in the financial world, like Hugo Chavez demanding his gold back, just to mention one of hundreds of issues.

The trajectory for the golden ascent is clearly increasing. It has even been exponential during the last month. If gold can take out 1,900 USD/oz, a gold price in the range of 2,100-2,300 before this year is over is certainly possible, since the seasonal moves to the upside are usually during this time of year. Silver, being the more volatile of the two monetary metals, is even more difficult. I do feel we will break the psychologically important 50 level at which point silver will probably take out 60 in a heartbeat. If this happens in September I think we could touch 70 by year end.

This is very difficult, and it’s getting more and more difficult every day as volatility increases not only in gold and silver, but also in their antitheses, fiat currencies. But for the fun of it going out on a limb, on December 31st 2011, I think gold will trade at 2,200 and silver at 65 USD/oz. 2012 will be even more extreme than 2011. Sit tight, and be right.

Feel free to contact me with comments.
Best Regards /Johnny

Gold is making new All Time Highs now almost on a daily basis. This after the S&P downgrade and gold braking Jim Sinclairs important target of 1,764 USD/Oz that he talked about in London at the GATA conference. 1,764 is where confidence in the fiat system is lost. Gold is today, at the time of writing, at 1,869 and change having almost touched 1,900 this morning (European time). In main stream media we read about the “gold bubble”. My readers know this is complete non-sense. If we were in a bubble, how do you think gold stocks would preform? During the dot com mania some companies on Nasdaq traded at P/E values of 45 (12 being “normal”)! Today, gold stocks are cheaper than during the dip of 2008 when gold was at 685 USD/Oz. Just look at this chart made by my friend “LAS” who sometimes has his charts published at Jim Sinclairs website. If gold stocks are as cheap as when gold was at 685 and gold is now at almost 1,900, where do you think gold stocks should be? Do you think we’re in a bubble?

Click to enlarge:

The GATA Gold Rush 2011 Conference was held at the Savoy Hotel in London 4-6 August 2011. I attended the conference out of personal interest and to learn from great minds. To summarize the conference is next to impossible, but I’ll sure give it a go.

The Gold Anti-trust Action Committee and its founders Bill Murphy and Chris Powell have been documenting the obvious and criminal price suppression schemes in the gold and silver markets for over 10 years now. Largely ignored, and considered fringe conspiracy theorists by main stream media, GATA has now emerged as a true free market advocate and a knight in shining armor for the gold and silver investment community. The conference was attended by hundreds of people from 38 countries and the respect for GATA and its board members was clearly felt and shared by attendees. I feel extremely privileged to have been able to meet such brave people.

During the last 10 years we’ve seen the gold price rise 7 fold and silver rise 12 fold. This despite the fact that the bullion banks on Wall Street have massively shorted both markets and conducted take-down raids on a regular basis. All this documented by GATA and submitted to authorities asleep at the switch. Considering the massive bull market of the last 10 years I’m astonished that the GATA conference wasn’t held at the Wembley stadium with attendees in the thousands. The level of intelligence among both speakers and attendees at the conference was well beyond my highest expectations. People invested now in gold and silver as a safe haven against market rigging, a financial system at the edge of a cliff, rampant inflation, ridiculous amounts of derivatives, excessive fiscal deficits and increasing debt burdens both public and private, are so far up stream ahead of the rise in public awareness of what gold and silver is: real money. Gold is the anti-thesis of funny money printed at will by Central Banks. When this fact is realized by the public we will see gold and silver prices at levels even farsighted attendees at the GATA conference will have a hard time imagining. Myself included.

I’ve spent at least five years of my life reading and learning on a daily basis about the financial system and how fiat money is created through the mechanism known as Fractional Reserve Banking. Still today, I find it difficult to grasp the complexity and the inter-dependence of our international banking system. Speakers at the GATA conference made things absolutely clear: We are now at a junction in time where the complexity of our banking system has reached critical levels.

This was one of the main points James G Richards made in his extremely good speech. Richards compared our global banking system to an avalanche waiting to happen. We can all see the snow piling up on the slope of the mountain, but none of us, not even Richards or the other intelligent speakers at the conference, can tell us what snowflake will cause the avalanche to come down on us. In that sense looking at individual snowflakes is pointless at this time. The whole is greater that the sum of its parts. We can look at the amount of snowflakes, but discussing the fractal nature and categorizing snowflakes is pointless. We know the avalanche will come down on us if it keeps snowing. Unfortunately there is a snowstorm coming. A perfect storm. Richards talked about what he calls “The End Game” and painted four different outcomes, the forth being chaos. That very week-end of the conference, the riots in London started.

The US is now downgraded by S&P, credit has frozen up in the Euro-zone and the Italian cabinet is having crisis meetings tonight. After the crisis of 2007 and 2008 private debt was nationalized. Now public debt has reached saturation levels. Here in Stockholm, the major gold dealer sold out of all 100g bars, an event that we haven’t seen since the collapse of Lehman Brothers.

Richards also warned that gold reserves of Germany held in US vaults might be seized by the US government in the midst of an escalating global financial crisis. Pondering what such an action would mean politically is something that I don’t want to do. We’ve seen currency wars. We’ve seen trade wars. Lets hope we don’t see wars of another kind. The fact is that the US is broke. The fact is that Germany cannot bail out Italy, nor Spain. The malady of the Euro-system has no cure. This is why gold is sold out across Europe. Richards also talked about what is being discussed now at the very highest levels of international finance: a new global currency, as one of four likely outcomes. In my view, a “solution” of that kind will be difficult to accept by Europeans when popular winds of nationalism is blowing across the Old World once again. When the Euro fails, people will want their national currencies back instead of a new Euro-system on a Global scale.

On a personal note, I’m very happy that I got the opportunity to shake Jim Sinclair’s hand and thank him personally for what he does, his writings that he gives out for free, writings that have been an essential foundation in my education and an important factor in my decision to exchange my hard earned fiat paper into physical gold. Sinclair’s speech was short but clear. We are now at a situation where confidence in the fiat system is hanging by a thread and gold has the potential to go into its parabolic bull phase. We’ve seen a steady ascent for ten years at about 20% per annum. Now we are at a point where the ascent can go exponential. That means higher and higher rates of climb for the coming years. Still, institutional investments, so called “smart money”, are nowhere to be seen. As for private investors, how many friends of yours own physical gold? 1 out of 100?

On Monday, August 15, it will be 40 years since Richard Nixon closed the gold window and defaulted on US government promises to pay trading partners in gold. Only 40 years ago, gold was at the center of international trade, a place it had kept for 5000 years at least. What do you think is the most sustainable system? Something that worked for 5000 years or a system where money, the blood of trade, can be diluted at will by Keynesian quacks at Central Banks to the point where oxygen can no-longer be delivered? Hold your gold positions and try not to analyze the volatility of individual snowflakes and know that gold will protect you from the coming avalanche. If you think gold has been volatile lately, you haven’t seen anything yet. Using leverage now will be a dangerous, albeit profitable game.

Only one man, other than Jim Sinclair, received standing ovations: London commodities trader and whistleblower Andrew Maguire. Having exposed the bullion banks for their criminal price suppression schemes in the gold and silver markets, Mr. Maguire and his wife suffered an assassination attempt by a hit-and-run driver. Fortunately Maguire and his wife survived their injuries. This is not only proof of the bravery of this man but also an indication that his claims of the severe criminality of the International Banking Cartel is accurate. The real looters of London are in the City of London, not its suburbs. As long as these bankers are free to roam the trading networks there will be no free markets, no true price discovery mechanism, only manipulation. Until we change the way money works, we change nothing, as former GATA board member Catherine Austin Fitts puts it.

However, their reign of brigandage are soon to be over as the Pan Asian Gold Exchange (PAGE) opens its doors for trading in both gold and silver, explained by Ned Naylor-Leyland speaking at the conference. This exchange will make it possible for domestic Chinese investors to buy 10 oz mini-contracts from the comforts of their own homes via the Internet. PAGE will offer 90 day spot rolling contracts with option to take delivery, 100% allocated. Additionally PAGE will be accessible globally with an RNB component. This will open the doors for international traders to get exposure to the RNB currency. An 8 AM Beijing fix will be in place by the last quarter of 2011. This will challenge the Anglo-American dominance since the 100% allocated gold backing of PAGE will produce a reversed Greshams Law vis-a-vis the unallocated Comex trading vehicle. This implies sell Comex and buy PAGE. PAGE is Chinas vehicle to release the RNB to the world and I can’t see this as anything but bullish for gold and silver. Just imagine what happens in the tiny market of silver if just a fraction of Chinese buy silver via PAGE. Silver above 100 USD/oz could be reached in a heartbeat, no matter what the Anglo-American Banking Cartel does. Physical demand will rule the paper shorts.

Credit must also be given to Reg Howe who gave an excellent presentation titled “Constitutional Money: Don’t Ask, Don’t Tell” available at his website.

Speaking to attendees was also an enlightening experience. All ages, creeds and backgrounds from all over the world. An interesting observation was that many attendees see farmland as their next investment. As silver will buy you bread and gold will buy you land, this implies that James Turk is correct about the future top in the gold market: “This time you will not sell it, you will spend it. Gold will reassert itself as currency”.

The last couple of years have been difficult on a personal level going against the herd. Humans are social beings and being a contrarian is hard work since you need to stand fast in your personal convictions. This takes discipline and courage. Looking back, what makes me proud of my own strength, having resisted criticism and sometimes even ridicule, is not the financial gains I’ve made, but the close friends I’ve helped with advice. In dire times friends and good advice are hard to come by. We, early gold and silver investors, will not be contrarians for much longer, so hang in there and be proud that you have the courage to walk your own path through the dark woods of finance. In the mean time, support GATA for their hard work, their courage, making our voice heard throughout the world and for providing a shining light in dark times. See you at the next GATA conference. It’s nice to be among friends.

With Love. /Johnny Mellgren

This article was originally published at RealMoneyTracker.com at: http://realmoneytracker.com/blog/2011/08/thoughts-on-the-gata-gold-rush-2011-conference/