A Message to The Bottom 90%

Has anyone ever wondered why no insurance company is game enough to insure bank deposits and nuclear power plants?

The answer is simple, no premium (as Chernobyl, Fukushima and Cyprus have proven) would be great enough to make it a profitable policy for the insurer. And even if there could be a profitable policy, it would not be affordable to either the industry or the consumer.

This implies that both banks and nuclear power plants are inherently dangerous because they both suffer from design and component weaknesses. In the case of banks they centre around the issues of fractional reserve banking, leveraging, borrowing short and lending long, greed and fraud. In the case of greed and fraud it is my observation that they morph into stupidity in their final phases.

"Thankfully", governments step in to insure both power plants and depositors but only to a degree of course. Just enough to maintain confidence. This of course starts to shatter when the big one hits. This "insurance" also plays another role. It acts as a kind of put against allowing banks to fail and against its management being jailed as the payout and consequences would be too big to handle. If you doubt this statement you only have to read what US Attorney General said recently and which was reported in the Wall Street Journal:

“I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them,”

and

Holder went on to suggest that, until Congress does something about it, the size of these banks will preclude bringing them to justice.

“I think it has an inhibiting influence, impact, on our ability to bring resolutions that I think would be more appropriate,”

Cyprus has gone off with a bang but distance, ignorance and smugness tends to downplay the fear in other depositors' minds across the world.

This is nothing new as history is littered with the victims of banks failing and closing their doors for any one of a number of reasons whether it be war, confiscation, hyperinflation etc. Is anything learned? Hardly.

Each time the victims are many and the clever ones relatively few.

The clever ones acquire real things and the extra clever ones acquire silver and gold.

I acknowledge that we live in a fiat driven world and that using gold and silver coins might be a tad inconvenient at times, but why keep anything more than a working balance in fiat with the balance stored in precious metals?

I know what you are thinking. Gold does not pay interest. Well neither does Bernanke.  Or does a bank that has shut its doors or a government that has commandeered your money pay interest?" Hardly.

And for those that receive interest, does that amount after tax and inflation actually leave you better off or does it leave you falling further and further behind?

The world of course is circling a chaotic drain with nothing in site to steer us away or to plug the hole. Governments keep adding liquidity but to no avail.

The drain is nothing more than a metaphor for both balance sheet and profit and loss inadequacies. The world is both insolvent and cash flow negative. It might be a good start to tax the $22 to $30 trillion stashed away in tax havens to reset the system, but how does that overcome the acute unemployment, the profligate governments, the mal-investment, the demographic time bombs, the war crazy governments, the unbalanced trade situation, the outsized financial sector and its derivatives and so on and so forth?

The truth is it doesn't although it must be conceded that the top 1% taking an ever increasing proportion of wealth and income are simply making the drain opening even wider. The drain opening is also made larger by unfunded liabilities, an ever increasing number of welfare recipients at both individual and corporate levels and last but not least the effect of compounding interest that simply speeds up the process.

All current efforts by governments to restore prosperity, or to at least halt the slide, will eventually fail as they always have throughout history.

The only government humanity needs is composed of  gold and silver, a free market and time honoured values of humanity.

Change however will not come from the top but the bottom.

You may be one of the bottom 10% that has only a couple of thousand dollars in personal assets which will eventually be used up in when you hit ground zero. You may as well make a decision and buy that ounce of gold or tube of silver coins before you hit ground zero as your passport for when the world resets itself. That oz or two will not save you now but will stand by your side in the future.

The frightening thing is that the bottom 90% is on course to join the bottom 10% as the middle class disappears and this is why the bottom 90% have common challenges.

Keep fighting the system that has you buying junk and watching junk and which has convinced you to measure life in terms of hedonistic outcomes rather than personal and communal progress. If personal mal-investment does not cease then corporate mal-investment is hardly expected to cease either. Business will always cater for the weaknesses of consumers and then go on to milk those weaknesses. And let us not forget the role of the finance sector as the great enabler when incomes cannot keep pace.

All three follow each other in a perpetual motion until all three collapse from sheer exhaustion brought on by mathematical impossibility.

I must also mention the unfortunate and desperate souls that pawned off their jewellery in Europe to the thousands of pawn shops that sprouted everywhere. They did not buy a solution, they only bought time which has now run out as well.

We are nearing the days when ownership will no longer be a concept but a memory. We are quickly losing ownership of our political processes, our privacy, our homes, our jobs, our savings (through confiscation and zero interest) and even our right to the truth which is constantly hidden or twisted by those that have an interest in pushing us down the drain.

Buying gold and silver is an act of defiance against those things and those people that have already turned the economic scene into a wasteland. Bernard von NotHaus may be awaiting sentencing for supposedly "counterfeiting" the US dollar but no one is asking the question why is his coinage now worth more than the dollar he supposedly counterfeited. Since when are counterfeit coins worth more than the "real dollar"?

Yes, Bernard von NotHaus may not be a saint but how is he to be compared with the loonies that were seriously propounding and discussing the issue of a trillion dollar coin to get around the debt ceiling impasse?

China has $3.3 trillion in foreign reserves but this does not take into account that when dollars are paid for imported gold, the level of foreign reserves actually falls even though you are importing the best form of money in return for worthless paper. If China has imported 4000 tonnes of gold since it last announced its gold holdings, it has in fact total reserves that are understated by over $200 billion.

Turkey is another enigma. In November 2013 a report in the news stated that:

"One of the strangest recent developments in Turkey has been gold sales to Iran, which have soared, so helping improve the country’s trade and balance of payments figures.

Thanks to this phenomenon, Turkey, traditionally a net importer of the metal, has racked up net gold exports of $5.5bn off the back of total gold exports of some $13bn so far this year..."

If you can't see the stupidity in this so called good news then what more can I say?

India is another nation that is not far behind in this level of lunacy. It does everything to avert its citizens from importing gold but does little to fight corruption and fraud which feeds the insecurity of the people and which in turn makes them take refuge in gold.

The people as well as the various governments of the USA are fearful of what lies ahead. They are broke and yet buy more and more guns and ammunition to defend their "brokedness".  The government monitors the so called preppers but in actual fact it and its agencies have become the biggest preppers of them all with their purchases of weaponry, armoured vehicles, ammunition, foodstuffs and setting up internment camps etc.

In 1940 the United States Treasury held 19,543 tonnes of gold in its Treasury, 183,514 tonnes of silver (1942) in its strategic stockpile and had a population of 132,164,569 people. It had therefore 4.753oz of gold and 44.641oz of silver per person.

Since then, on a per head of population basis, it has lost 100% of its silver stockpile and 82% of its gold stockpile. If instead it had increased these stockpiles in line with population growth it would have had stockpiles now worth close to $2.7 trillion. Without dead end wars adding to deficits, interest on that debt and perhaps no manipulation of precious metal prices it is possible that the USA might not have had any debt, any enemies and any crumbling infrastructure and a broken society. It could have been a nation of happy people making things for one another instead of frisking one  another at airports and bus terminals.

My message is always the same but in different words. I can only state that the system is fake because it is built on a base of lies that need to multiply to keep the truth from sight. The gold and silver you buy and hold cannot be adulterated and cannot be rendered valueless by man or time.

What you do is determined by whether you understand the difference between price and value and whether you understand the difference between news and history.

My choices are value and history.

What will yours be?

Peter Souleles

Sydney Australia