Gold and Silver Poised to Surge on Ticking Debt Bombs
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By James West
on 7/14/2011
Gold and silver are threatening to break new ground driven by one simple
fact: Nearly all wealthy nations are labouring under one form of
debt/monetary inflation issue or another. Ireland and Greek bonds have
now been reduced to junk, Japanese bonds became safer than Chinese as
reports of China's massive deficits internally offset the rosy picture
supported by 9.5% performance in the Chinese economy. Italy is looming
large as the next bailout candidate, and the United States prioritize
political brinkmanship over problem solving. Gold and silver are seeking
new highs and threaten to break out strongly - especially now that the
Fed has acknowledged a willingness to launch QE3.
The ridiculous posturing by Democrats and Republicans in the U.S. over
the imminent rise in so-called borrowing makes it almost embarrassing to
be human. They can't even get out of the way of their own political
agendas to solve a problem threatening to make politics obsolete.
Certainly, I'd be embarrassed to be American. But on that point, I'd be
embarrassed to be English, Irish, German, French, Swiss, Portuguese and
especially Greek, Italian or Spanish. Stand close to any of the Davos
men who constitute these nations' finance ministers and you are
immediately struck by the impression that you're in the presence of the
best-dressed con artists walking the globe.
But the creative rhetoric that has resulted in 2 + 2 equalling -4 since
the deficit spending party got underway with the end of the Bretton
Woods Agreement by the hand of Richard Milhouse Nixon is starting to
disintegrate under its own inertia. The novelty and creativity of the
formulas and structures, and subsequently, new language, required to
continue funelling artificial dollars into broken down debt vehicles is
yet insufficient and the charade is reaching its unavoidable and
imminent end. Is it a coincidence that the debts, currencies, and
economies of the top European, Asian and North American countries are
all accelerating towards the brick wall of default at the exact same
point in history? I smell a rat, or rather, a whole pack of rats. I
think the ruling class, which is without a shadow of doubt corrupt
beyond redemption, have figured out that if you bury your theft in a
mountain of debt, it will never be found and you can ride off into the
sunset undiscovered. Its
time for the politicos and their brainwashed over-educated economists
to disclose publicly both the amount of taxes paid on their sources of
worldwide income.
But that's another story. It amazes me, and then again it doesn't, that
there are no culprits in this grand global forum of doublespeak. The
Greeks are guilty, but not a single Greek person has been named as
responsible for anything that might constitute a transgression of
fiduciary duty. The American president blames the Republicans, who blame
the democrats. Again, nobody is fingered as the leader or treasury
secretary or central bank chairman who is guilty of a crime, or even of
towering stupidity. Greenpspan's taking some heat, but he rode off into
the sunset, and so in his dotage is a safe target. If corporations are
the beard for the unsavoury acts of businessmen, then government is
certainly the place to hide for leaders who seek to enrich themselves at
the expense of the general public.
SELF DELUSION AS DESIRABLE SKILL-SET
It's true that People tend to embrace the convictions that serve their
circumstantial requirements. A cancer patient believes unequivocally he
will beat the disease. A gambler believes just as forcefully that he can
beat the house. An athlete believes he will win, and a judge believes he
is qualified to pass judgment and sentence on the lives of others. In
the United States, the President and Congress believe it is both their
right and their obligation to pretend that the inevitable will only
occur according to their political conditions, and fail to recognize
that the inevitable will happen because its inevitable. Both sides know
that there is absolutely zero chance of a compromise not being reached,
and both sides plan to hold out for their respective demands until the
very last possible second. Obama promises the Biggest Deal Possible, and
Republicans are obliged to proclaim a Little Tiny Deal.
That means the solution will be the equivalent of little tiny band-aid
on a gaping wound in a rain storm. It might slow the tide of the larger
inevitability - the collapse of the U.S. dollar and the U.S. financial
apparatus - but only temporarily. And then, maybe not at all. Where the
boundaries of reason have long ago been surpassed by the astonishing
ridiculousness of the economic ruling class, the average intellect is at
a loss to opine where the relentless plunge into the apparently
bottomless abyss of debt might end. Can we really keep 'refinancing' and
'rolling over' and 'reinsuring' our way into infinity? Is the next debt
ceiling measured in quadrillions, and then quintillions, and so on?
At the end of the day, these vast sums being loaned into existence by
the collusional participation of elected officials and their appointees
is a smokescreen for skimming the national take and paying the minimum
tax.
But the scheme has evolved into a scam, and the scam has gotten so
mature, that like any Ponzi scheme it needs to replace old investors
with new ones to keep the balls in the air. It looks like the principle
product of our globalized pyramid economy - indebtedness - is about to
collapse, because all the participants are maxed out; there are no new
investors to keep the scam going. The central banks can't create money
fast enough to make even the interest payments on these colossal debts.
We could theoretically amp up the rate of money issuance, but even with
zero interest rates, that's too much for the already over-inflated
financial system. The value of national currencies is in terminal
decline relative to real goods, and we are witnessing the birth of the
first global hyperinflation in history. Which brings us back to the main
thrust of this story, which is that we are on the verge of a major
chronic meltdown.
The acuteness of the self-inflicted austerity measures that Obama has as
his only bargaining chip, versus the depth of relinquished tax breaks
which is the only bargaining chip of the Republicans, is all that
remains to be negotiated in America. That and the numerical name of the
next debt ceiling. In Europe, the game is slightly different. On
multiple fronts, the banks and the governments are negotiating austerity
measures as if they were carbon credits. And just as carbon credits are
easily counterfeited, or cancelled, or fraudulently re-sold, the
promises will be modified by political expediency, the CDO spreads and
interest rates will be adjusted to suit the reality required by all the
vested interests, and the numerical names of the next bailouts, puny in
comparison with America's, established.
CHINA AND JAPAN
The news yesterday that China grew by 9.5% in the second quarter of 2011
appears to have allayed fears that the Chinese Tiger was growing a
little bit tired and threatening to lie down for a while. But not before
the Chinese bad news triggered a warning from Moody's.
According to the Wall Street Journal:
"China on Monday failed to sell some of the 50 billion yuan ($7.73
billion) in local bonds offered at a regular auction. It was the first
time one of these Ministry of Finance auctions failed to sell out since
they began in 2009. Local governments can't issue bonds directly so the
ministry auctions the bonds on their behalf.
Ratings firm Moody's Investors Service warned last week that
local-government debt posed an increased risk to the central government
and the banking system, and said a National Audit Office estimate
putting the debt at 10.7 trillion yuan understated the actual amount by
some 3.5 trillion yuan.
With Europe squabbling over where to meet next, and Obama sticking to
his guns for concessions on tax breaks, the bigger picture is looking an
awful lot like gold and silver will be the ultimate beneficiaries of all
this debt stupidity.
When the bombs go off and the delusion can no longer be supported, we'll
wake up and understand that defaults on all fronts have been ongoing for
quite some time. Then the stampede will really begin into gold and
silver.
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