A Store Of Rubbish

In the current economic climate they can attack gold, but they cannot destroy it. Paper manipulations and media distortions can be very effective in scratching gold's surface and scaring weak hands into giving it up, but they cannot create jobs, win wars, redeem the securities held by Social Security Trust Fund or repair decaying infrastructure. The Director of the Congressional Budget Office, Douglas Elmendorf himself recently stated that "U.S. fiscal policy is unsustainable, and unsustainable to an extent that it can't be solved through minor changes" and even the Fed's Beige Book has now put off recovery for another 5-6 years. With the current policies of the USA, Europe, China and Japan, recovery will only be possible after a complete collapse.

If you cannot make sense of what is happening, that is not surprising given how much goes on behind closed doors and through murky channels. All you have to remember is that if things were so good why would there be such a level of secrecy surrounding so many transactions.

THE SIMPLE TRUTH

Those of us that support the return of some form of gold standard do so only because gold's limited supply has an uncanny ability to limit profligate and unwise spending. Imagine a ruler who offers his subject $100 in gold to fight in a war. If his subject refuses he must either offer more or decide against war. In today's world, governments can offer "more" either by printing the requisite number of dollars or borrowing more. In the case of the higher gold payment the soldier has truly earned more. Purchasing power and wealth have been transferred from the king to his subject. In the case of the higher "paper" payment he returns home to find that the higher payment has been devalued by higher prices and perhaps higher taxes to pay off the debt. The current reality is very close to this simple example.

THE ONLY PLACE YOU WILL FIND RECOVERY IS IN A DICTIONARY

Everyone is praying for a recovery. I hate to say this but it could be the longest prayer in history other than the one for world peace. The reason for this is that what most people envisage as a recovery is a return to what we had 5-10 years ago. To me this would not be a recovery but blight upon humanity and civilization. Any resumption of the practices and trends of yesteryear would be a grotesque denial of the human folly that manifested itself during those years.

Real recovery will return when currencies of the world can once again become true stores of value.

LET THE YOUNG PAY FOR OUR SINS

We have all to one degree or another either caused or participated in the current malaise and yet we cling to our demands for pensions, services and medical care of the highest standard. We are foolish and mean enough to expect the young and the unborn to shoulder our debt, our mistakes, our wars and at the same time to provide for our old age.

How can we expect this of them? Are we providing them with a world class education? Are we handing them the keys to functioning factories? Are we bequeathing them with superb infrastructure? Are we providing them with jobs that can support a family and mortgage repayments? I hardly think so.

The unemployment rate for 20-24 year olds is 15.8% whilst the participation rate has slumped to 71%.

A CRISIS OF VALUES AND LEADERSHIP

In Greek (from where the word crisis comes from) the word crisis not only means crisis but also means judgement. In other words we need to realise that this crisis is nothing more and nothing less than judgement being passed on our stupidity, evil and unbridled desires and systems. We are therefore paying the price and will continue to do so. Unfortunately, the judgement is being felt disproportionately by the participants.

Bankers continue to be rewarded and factories relocated to China and elsewhere. Free trade does bring cheaper goods but if jobs are lost goods become very expensive no matter what price they are. Such moves were good for corporate America but in a piece titled "Are European Companies Ready to leave China", AP Business Writer Joe McDonald had this to say:

An annual survey of 500 European businesses found that 36 percent believe Chinese policies have become less fair in the past two years and a slightly higher percentage expect conditions to get worse, the EU chamber said.

A key complaint was Beijing's "indigenous innovation" policy, which favours domestic technology in government procurement. Companies say that will force them to hand over trade secrets and other information that might help Chinese rivals if they want to sell to the government."

REDEFINITION REQUIRED BEFORE EXTINCTION

The USA and dare I say most other western nations, need to redefine themselves if calamity is to be avoided at some point in the not too distant future. Before we can do this, we must revise our definitions, reclaim values that are time honoured and tested and place the best part of our efforts in creating opportunities for the young. If we fail, we will be doomed in this life and damned in the next.

Lame brained methodologies of what constitutes additions to GDP, are giving us a quantitative measure that is devoid of any real quality. How a $10 million casino can have equal weighting to a $10 million school is beyond me. As a result we build casinos and close schools, fire teachers and hire croupiers, and if in the process we open more casinos than we close schools, our politicians can proudly boast that we have had economic growth.

The constant outcries over sub-prime and toxic assets must be matched by outcries over sub-optimal GDP expenditure.

Sure, they can even fudge unemployment figures by re-defining what constitutes "unemployed" but they cannot hide the fact that the median duration of unemployment for those still getting past the definition hurdle is now 26 weeks or twice the rate of any year since 1965. If you don't believe me here is the graph.

CONFESSIONS OF A PATRIOT

Please consider the following statement by Congressman Ron Paul about the USA:

"I think it's already bankrupt. It's insolvent, and we couldn't pay our bills. The official declaration hasn't been done yet but we couldn't pay our bills. Everything that we pretend that we owe… there's no cash flow to pay for all the bills. Even if we sold every acre of land in this country I don't think we could pay our bills.

If this statement was not true, surely the President and Chairman of the Fed would have sought to expel him for unpatriotic behaviour and perhaps even treason. They haven't though.

Sad and unimaginative politicians can only think of legalizing the sale and use of marijuana so they can tax it. What next? Legalized child pornography as long as its circulation is also taxed? Or perhaps polygamy as long as a yearly fee is paid?

Unvarnished truth, public accountability and transparency should have been the lynchpins of democracy. Instead, the exact opposite applies. The ballot box no longer offers a choice to the voting public. It is simply a fenced enclosure into which the 'sheeple' are herded, shorn and then skinned alive. Democracy is now merely a charade to confuse the masses into believing that they have power, choice and freedom. The truth is they have none of the above.

Stress tests on US and European banks are nothing more than stage managed events. Inflation calculations are distorted to overestimate growth and to rob workers and social security recipients of real adjustments.

And how about falling incomes? That is the unrecognized inflation which is far more pernicious than the 2-3% inflation rate reported. Bread might only have gone up by 2% but if your income has gone down by 20%, how much bread can you now buy?

The changing timetables and arrangements for Iraq are a joke and the recent fine of $550 million on Goldman Sachs to settle fraud charges is the equivalent of issuing a traffic infringement to a bus driver who goes through red lights and kills 20 school children.

Transparency is non-existent. We still do not know who the recipients of TARP funds are. We still do not know what (if any) gold is still held in Fort Knox. The list goes on.

SUCKERS AND MORE SUCKERS

They say there is a sucker born every minute. I disagree. No one is born a sucker unless they come out of the womb clutching paper currency. People become suckers when they cease to think for themselves, neglect to read history and allow the resulting vacuum between their ears to be filled by the siren calls of politicians and media. Ulysses had the good sense of having his crew tie him to his ship's mast to stop him from succumbing to the sirens' call. This is still a free world when it comes to investment decisions. Unfortunately it is also a costly world when those decisions prove to be wrong.

Anyone holding US dollars, yen or Euros, is a sucker in the making. The exact timing of this day of reckoning is anybody's guess given that propaganda, communications, technology, laws and law enforcement will back the invisible masters to the bitter end.

Just as I was finishing this piece I came across an article in which Maurice Newman who is Chairman of the Australian Broadcasting Corporation had this to say, "people seem to buy what the (US) Fed says, buy what business says, which has obviously got a vested interest in keeping the music playing." Need I say more?

THE PRICE AND DIRECTION OF GOLD

The recent fall back in gold and silver prices is simply a function of complacency creeping back in amongst investors with short term horizons and short term memories. Good luck to them if they manage to get their timing right. Horizons will often appear to be distant but the tsunamis that appear over the horizon have a habit of being unexpected and very fast moving. I am amazed, as others must be, that gold's long history is ignored and belittled by "elite thinkers" who place greater trust in the current system and its operators to find a solution even though they are largely the individuals who missed the signs, created the conditions or exacerbated them in the process of heading their various institutions.

If you are getting anxious about the direction of your gold or silver then sell it. Stronger hands will buy it. There will always be buyers for gold and silver but history tells us that this is not always the case for fiat currencies.

Which will you be? Victim or victor? Or as Kris Sayce would say which would you collect, the store of value or the store of rubbish?

Sydney Australia
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