Silver Price, a Complete Joke; Look at the Chart!

The silver price has dropped to such low levels that, a year from now, traders will wonder why they didn’t buy some at such great prices.  And if the price isn’t much higher a year from now, it must have been that politicians and central banks suddenly got religion and stopped debasing currencies.

But how likely is that?  Who wants to be in an official capacity when the Bastille is being stormed by people all over Europe in one massive European Spring?  Scarey stuff, indeed.

According to the silver chart, the price has approached very close to a meaningful support level of $26.15.  A plunge below $26.15 most likely can only mean one thing: a John Taylor (of FX Concepts) scenario of complete financial Armageddon in Europe, riots, government overthrows in countries not typically in the radar of Western news, or maybe revolution in Greece, for example.  Under that scenario, the gold price might hit $1,000, according to Taylor.

A collapsed euro would temporarily soar the dollar until investors jump ship from the greenback following the short-term knee-jerk reaction.  Then the focus on the dollar begins, and the financial metrics aren’t any better in America.

Sounds too speculative?

Consider, in 1873, when the German property market collapsed and Austria demonetized silver, the ripple effect in the US was devastating.  The 1873-1878 Depression in the U.S. and Europe was worse than the Depression of the 1930s, though very few analysts refer to that period as a comparison to today’s financial crisis; that period was too long ago.

In 1907, the banking system collapse in the U.S. following the failure of the Knickerbocker Trust Company caused stock market crashes in Europe, with Rome and Paris taking the biggest hit of approximately 50 percent drops in their major indices.

In 1921, financial turmoil post-WWI devastated both the U.S. and Europe, as well, but the Depression at that time was very short lived—approximately 18 months.

Then, the Depression of the 1930s.  Ditto, both side of the Atlantic were crushed for more than a decade.  Then, WWII came and went.  The U.S. dollar was chosen as the world’s new reserve currency of the because the U.S. was the last man standing following the devastation of Europe.

Since the 1930s, recessions and currency problems have affected the U.S. and Europe like Siamese twins.  Both sides of the Atlantic have been linked for centuries; and the suggestion that some how the U.S. won’t crater from a European debacle is just pure nonsense.  As Europe goes, so goes the U.S.

Globalization is not a new concept; it’s very old.

Therefore, the Fed, ECB, the BOE, SNB and the BOJ can be counted on to work together to re-inflate when the time is right.  Each knows the others are dependent upon the group.  And that time to re-inflate is about right now.

According to the silver chart, this summer central banks will intervene, if not earlier and between FOMC meetings. That’s the time silver will most likely begin its journey to $50, and beyond.  Patience and a long-term horizon is needed to outlast the day when markets have had enough with the broken monetary system and flee paper en masse.  We’re not there, yet. However, time is on the side of silver investors.  Hang in there and continue stacking.

Paul Krugman Whores for the Fed

“The conscience of a liberal” Paul Krugman once again demonstrates his role as Fed bitch.  Like a third-world young lady receiving an all-expenses-paid trip to a developed nation in return for a chance to ‘make a living’, Krugman must ‘put-out’ once in a while for the Fed syndicate who launched his stardom with the Norwegian Nobel Prize Committee.

New York Time’s latest talent hit the street with his latest summation of the outlook for the euro in an Op-Ed piece, dated May 17, titled, Apocalypse Fairly Soon.  There, he states with crocodile tears that he’s not “optimistic” about the euro’s immediate future.  It’s such a pretty currency; too bad it has AIDS.

“Suddenly, it has become easy to see how the euro — that grand, flawed experiment in monetary union without political union — could come apart at the seams. We’re not talking about a distant prospect, either,” Krugman writes. “Things could fall apart with stunning speed, in a matter of months, not years.”

Krugman knows quite well that a failed euro spells a hastened demise of an equally failed U.S. dollar, as every John who attempts a trysts with the American competition soon finds out he’s been ‘had’ by a ladyboy, posing as the real thing.

“Realistically, the only way to provide such an environment [of hope for Spain and Italy] would be for the central bank to drop its obsession with price stability, to accept and indeed encourage several years of 3 percent or 4 percent inflation in Europe (and more than that in Germany),” Krugman offers as a solution to the euro crisis—a solution of bondage to 300 million Europeans who seek to make an honest living without selling their bodies on the streets to pay a bunch of banker pimps.

But Krugman’s pitch is a devious one, in that, he seeks, not only a solution of collectivized inflation, but a solution that gives the Fed room to inflict the same monetary policies across the Atlantic in the U.S.  If Europe will debase the euro, the U.S. will, too, in a see-saw trading range between the world’s two most important reserve currencies.

In essence, the coke-head economist prescribes a theft of capital, savings and income from the virtuous so that the racketeering can survive another day—maybe decades—on both continents, representing nearly half of the world’s GDP.

But Krugman claims he has a “conscience,” that lovely tart who promises to “love you long time” kind of conscience.

From dictionary.com:

conscience: the inner sense of what is right or wrong in one’s conduct or motives, impelling one toward right action.

“Think of it this way:” Krugman continues.  “Failure of the euro would amount to a huge defeat for the broader European project, the attempt to bring peace, prosperity and democracy to a continent with a terrible history.”

Democracy?  Tell that to Greece’s and Italy’s technocratic-led governments.

Prosperity?  Krugman’s neo-Ricardian model, infected with a common currency is, not only complicating a half-baked theoretical frame work for trade, it’s un-Democratic to say the very least—which brings us to his envisioned “peace” for the eurozone.

Maybe, if the Nurse Ratched approach of forcing an economic version of ‘busing’ in the eurozone could be rethought and untangled from the project’s real flaw (a common currency crossing sovereign borders), a more natural solution may emerge—like a Bretton Woods II.

A discussion along those lines, between Paul Krugman and former Bundesbank chairman Axel Weber, would provide some hands-on research work to fully-bake a sequel to Krugman’s book, Geography and Trade.  Maybe then Krugman might discover that people cannot be cookie-cut into formation to suit a global agenda, which is doomed to fail miserably for the same reasons a mutual understanding between Weber and a Woodrow Wilson School radical cannot be forged.

German Bundesbank’s “Incredible Gold Scandal”

“The incredible gold scandal,” the German newspaper BILD began its article about the disposition of Germany’s mysterious gold holdings following the collapse of Lehman Brothers in 2009.

Growing pressure from the German people and politicians exerted upon its central bank, the Bundesbank, to audit the nation’s gold reserves intensifies, running parallel with escalating anxieties felt by German taxpayers for more than two years leading up to Greece’s to-big-to-pay $18 billion interest payment deadline of March 20, 2012.  Sign-up for my 100% FREE Alerts

Everyone knows that Greece doesn’t have the money, and the big money has bet that Greece will have to officially default on the 20th, as evidenced by the one-year Greek bill, which topped 1,100 percent this week.  Hedge fund managers have spoken: Greece is done with the euro.

Now it becomes a scramble for the gold.

Considering the ominous Greek sovereign debt backdrop, a suspicious Germany now wants to know where its gold is stored, as the last audit made in 2007 clearly indicates that the Bundesbank skipped its 2010 audit.

Just as pressure has been applied on the Fed by U.S .Rep. Ron Paul to agree to an audit of U.S. Treasury gold held at Ft. Knox and West Point, Germany may have to break the rules, too, by stonewalling the country’s elected representatives on the matter of its gold reserves.

“A clear breach of the law,” top Bilanzrechtler Prof. Jörg Baetge told BILD. “At least every three years to control counts the bars are made. [Google translation]”

When Germany’s controversial member of the Bundestag, Phillip Missfelder, inquired into the reason for the missed audit by the Bundesbank, the 32-year-old  chairman of the Junge Union received a series of Fed-like responses from Germany’s central bank.

“I was shocked,” Missfelder told BILD.  “First they said that there was no list.  Then there were lists that are secret.  Then I was told, demands endanger the trust between alliance bank and the Fed. [Google translation]”

A skipped audit, and now, peculiar responses from one of the most respected central banks, regarding the world’s second-largest sovereign gold stockpile (after the United States) has gold bugs wondering if German gold has been essentially held hostage at the NY Fed to prevent another explosive run in the gold price.

Coincidentally, or not, some traders suspect that Venezuela’s Hugo Chavez’s repatriation of 99 tons of gold from London vaults created a nearly 25 percent jump in price during the un-seasonal summer rally in gold of last year.

But in the case of Germany’s 3,401 tons, of which approximately 60 percent (2,000 tons) is rumored to be stored outside of Frankfurt, a potential move in the gold price from an unwind of 20 times more potentially re-hypothicated gold (levered as much as 100:1) could take out gold $5,000, $10,000, $20,000 or more, easily, if Germany insisted that its gold (possibly rehypothicated) be returned to its own vaults.

A leveraged gold market of approximately 100:1 would, in effect, translate to 200,000 tons (2,000 x 100) removed from the gold market (or any fraction of that amount).  That cannot happen without a total and immediate implosion of the world’s Western fiat currencies (in terms of gold).  It’s too much gold to unwind and continue on the facade of viable Western fiat currencies.

Therefore, German gold moving back to Germany won’t happen.  London’s scramble to find 99 tons for Chavez is one thing; finding as much as 2,000 tons to ship to Frankfurt is quite another.

Missfelder told BILD, “It may be that is the gold assets of the German apparently violate any applicable accounting law.  This is a case for Parliament.  I call for a clear view. [Google translation]”

Aside from the heat that Germany has taken for more than two years in its fight against pledging its country’s people as collateral for Greek fiscal profligacy, Germany has another, even bigger problem.  That is: how to repatriate German gold without destroying all hope of keeping the post-Bretton Woods fantasy alive.

Will Germany ultimately take the big hit at the endgame of dollar hegemony?

Author of Currency Wars, Jim Rickards, believes that German gold has, de facto, been confiscated, already.  If any mention from the officialdom in Berlin that it seeks to repatriate its gold reserves could force Washington’s hand to refuse the request and confiscate the up-to 2,000 tons of gold held at the NY Fed.

“ . . . as I’ve described in the book Currency Wars, if the U.S. gets into extreme distress, and there’s a collapse in the dollar, I have no doubt that in an emergency basis the U.S. will basically confiscate all the gold in their possession,” Rickards told King World News in mid-November.  “Then they will convert it to back up a new gold based U.S. dollar as plan B or some way to stop the crisis.”

Rickards continued, “So it’s a political question for Germany as to whether they want their gold back, but sometimes you don’t ask questions if you don’t think you are going to like the answer.  It would be interesting if Germany demanded that gold be shipped to Frankfurt or Berlin what the U.S. would say.”  Sign-up for my 100% FREE Alerts

Cuban Missile Crisis, the Sequel; $3,000 Gold Possible

In what appears as swift retaliation by Iran against U.S.-led economic sanctions imposed on the Persian Gulf state, suddenly Iran says it will no longer accept the U.S. dollar as payment for its oil shipments to India, Japan and China.

In addition, bilateral trade between Iran and Russia will break from the dollar for settlement in favor of Iranian rial and Russian rubles, according to Iran’s state-run Fars news agency.  Sign-up for my 100% FREE Alerts

But unlike a similarly bold move taken on Oct. 30, 2000, (effective Nov. 6) by Saddam Hussein to rid Iraq of the U.S. dollar as payment for Iraqi oil, Iran asserts the new arrangement to drop the dollar was Russia’s idea.

“The proposal to switch to the ruble and the rial was raised by Russian President Dmitry Medvedev at a meeting with his Iranian counterpart, Mahmoud Ahmadinejad, in Astana, Kazakhstan, of the Shanghai Cooperation Organization,” according to Bloomberg.

So, is the U.S. about to embark on another Iraq, or is the situation with Iran more akin to an October 1962 Cuban Missile Crisis with Cuba’s big brother, Russia?

Amazingly, or not (media ignored the euro-for-Iraqi-oil story, too), since the bombshell Iranian announcement, only a handful of news outlets of the West covered the dollar-dumping announcement of this vital story.  Of course, though, zerohedge.com (and PrisonPlanet.com’s posting of the zerohedge post) was one of these handful, providing adequate sourcing and commentary of the breaking news about Iran/Russia from China-based ChinaDaily.com.cn.

Most of the usual suspects of traditional media, however, have drawn attention to the threat of a closing of the Strait of Hormuz, instead—an important issue, no doubt, but its no longer news at this point in the crisis and certainly doesn’t compete with the latest development regarding the trashing of the Greenback from a member of OPEC on the same day Russia lays anchor in Syria to the north of Israel.

According to China Daily, “Russian warships patrolling the eastern Mediterranean Sea have docked at Russia’s naval supply facility in the Syrian port of Tartus, the private Addounia TV reported Saturday.

“Governor of Tartus Imad Naddaf received the ships’ leaders and expressed appreciation to Russia’s support for Syria, the report said.

“Russia’s state-owned Itar-Tass news agency quoted a source from the Russian Navy as saying that ‘It is planned that the port of Tartus will be visited by a big anti-submarine ship of the Northern Fleet Admiral Chabanenko and an escort ship Yaroslav Mudry.

So, it appears that the Iranians are a lot more prepared to deal with the U.S. than its neighbor to the West was, Iraq.

And for those familiar with the most likely reason for the attack on Iraq may also be familiar with William R. Clark, author of Petrodollar Warfare: Oil, Iraq and the Future of the Dollar.  Of course, ‘weapons of mass destruction’ was merely a sophomoric ruse in the call to war with Iraq.  So what was the reason?

In his book, Clark makes a case for a world that will most probably include a future riddled with war in the Middle East, as the U.S. takes preemptive measures to secure—not only oil—but more importantly, to assure a continuation of dollar hegemony in global trade as a means of preventing a Greenback collapse as a medium of exchange and value.

As a preface to his book, Clark posited an essay in January 2003, titled, Revisited — The Real Reasons for the Upcoming War With Iraq: A Macroeconomic and Geostrategic Analysis of the Unspoken TruthIn the essay, Clark cites an anonymous source who told him the NY Fed (through the Treasury ESF) ultimately dictates foreign policy via the U.S. dollar, and that any threat to the artificial support of the dollar must illicit an immediate response at the NSA level.

After reading Clark’s essay, anonymous, or not, the source appears to be a very, very good one.

According to anonymous:

The Federal Reserve’s greatest nightmare is that OPEC will switch its international transactions from a dollar standard to a euro standard. Iraq actually made this switch in Nov. 2000 (when the euro was worth around 82 cents), and has actually made off like a bandit considering the dollar’s steady depreciation against the euro. (Note: the dollar declined 17% against the euro in 2002.)

The real reason the Bush administration wants a puppet government in Iraq — or more importantly, the reason why the corporate-military-industrial network conglomerate wants a puppet government in Iraq — is so that it will revert back to a dollar standard and stay that way. (While also hoping to veto any wider OPEC momentum towards the euro, especially from Iran — the 2nd largest OPEC producer who is actively discussing a switch to euros for its oil exports).

Saddam sealed his fate when he decided to switch to the euro in late 2000 (and later converted his $10 billion reserve fund at the U.N. to euros) — at that point, another manufactured Gulf War become inevitable under Bush II. Only the most extreme circumstances could possibly stop that now and I strongly doubt anything can — short of Saddam getting replaced with a pliant regime.

Big Picture Perspective: Everything else aside from the reserve currency and the Saudi/Iran oil issues (i.e. domestic political issues and international criticism) is peripheral and of marginal consequence to this administration. Further, the dollar-euro threat is powerful enough that they will rather risk much of the economic backlash in the short-term to stave off the long-term dollar crash of an OPEC transaction standard change from dollars to euros. All of this fits into the broader Great Game that encompasses Russia, India, China.  [Emphasis added]

As we know, following Iraq’s decision to dump the dollar in favor of the Euro, 14 months later U.S. President George W. Bush delivered his ‘Axis of Evil’ speech on the first State of the Union address of his presidency on Jan. 23, 2002.  Iraq, Iran and N. Korean are the nations of that axis, according to Bush.

With Iraq as the first casualty of the Great Game, that leaves Iran and N. Korea left as targets and responses from Russia and China.

Calls for $3,000 gold are everywhere.  With central banks printing money at astonishing rates without formally announcing anything about it; tensions in the Persian Gulf rivaling the Cuban Missile Crisis; and an election year that sports the most threatening presidential candidate (Congressman Ron Paul of Texas) to the ‘establishment’ since John Kennedy (or maybe as far back as Theodore Roosevelt 1900-08), it appears early on that surviving 2012 without a major event is a very long shot, indeed.  Sign-up for my 100% FREE Alerts

Related BER articles,

Gerald Celente: EU Collapses in 90 Days, Bank Holiday and War

Gerald Celente Forecast 2012, FEMA Prepares for Dollar Collapse

WikiLeaks Exposes Germany’s Euro Exit, Gold, Diamonds, Oil to Soar

It’s the German way or the highway in the eurozone, according to the latest hot cable released by WikiLeaks.  Sign-up for my 100% FREE Alerts!

U.S. ambassador to Germany, Philip Murphy (Goldman Sachs alumnus), issued cable 10BERLIN181 to Washington on Feb. 12, 2010, which essentially states that Germany leadership’s reluctance to backstop the PIIGS’s profligate spending of the past centers upon its sense that, in the end, Germany’s political and economic survival would be placed in jeopardy.

It appears Germany has no intentions of running a U.S.-style print-and-spend economy, nor does it want to hand over decades of productively earned savings to a bunch of layabouts from Club Med, either, especially those in Greece, where a Greek civil servant is able to retire at age 50, and, while employed, can take 14 months pay for 12 months work, for, presumably, spending-money during vacations.

Approximately 40% of the population of Greece works for the public sector. In comparison, nearly 20% of U.S. jobs come from U.S. tax dollars—a bloated number even by U.S. standards.

Gross inequity.  That’s the predominate mood in Germany, according to German news organization Die Welt (translated to English), which published a poll revealing that 71% of Germans insist upon a referendum on further steps taken regarding German’s obligations under the euro currency block.  Sixty-three percent of Germans want Greece to leave the euro.

One can only wonder about the rational of the other 29% and 37%, respectively, who agree to pay for early retirements and lucrative government jobs for so many Greeks.

Moreover, it’s no secret that Greeks don’t even want to pay for their own government’s spending habits.

CNN reported, “Greece is renowned for its history of tax evasion, estimated last year as worth 4% of GDP—$11 billion.”  That amount equals to approximately $560 billion to the U.S. Treasury derived from a $14 trillion economy—per year.  But the UK Telegraph suggests the amount of tax payments evaded is much higher. Greece loses €15bn ($20.5bn) a year to tax evasion, is the headline by the Telegraph.  Now, we’re talking nearly 7% of Greece’s $304 billion GDP (World Bank statistic).

And the New Yorker Magazine writes, “Greeks . . . see fraud and corruption as ubiquitous in business, in the tax system, and even in sports.”

So Germans, who’ve prided themselves as the most productive workers of the most extraordinary products for centuries, are now asked to pay into a broken system that the Greek people, themselves, don’t have confidence in?

In all, the WikiLeak’ed cable doesn’t add much new to what is already known, but it’s an interesting note that Washington has been bantering around the German question for some time, and has probably added fuel to the fire in Europe, too, in the hopes Treasury can skate a little while longer with its dollar debasement program of scare tactics, herding fund managers into the ‘safety trade’ of the U.S. dollar—another grotesque excuse for a currency.

Little attention by the U.S. media has been paid to the U.S. dollar’s noticeably weak response to the circus-like atmosphere in Europe—with no qualms, either, from the rumor mill of the Financial Times of London, as the Anglo-American tag team place center stage each and every sideshow act, as well, though Berlusconi’s narcissistic behavior can be quite amusing and compelling to report.

If the outrageous situation between the Germans and Greeks isn’t enough to crash the euro experiment in a heap with the Ford Edsel, the best tidbit within the Murphy cable briefly outlines the most difficult bolder to roll in the effort to force Germany to bailout Europe (which it mathematically cannot anyway): the legal one.

“In 1990, Germany’s Constitutional Court ruled that the country could withdraw from the Euro if: 1) the currency union became an ‘inflationary zone,’ or 2) the German taxpayer became the Eurozone’s ‘de facto bailout provider,’” Murphy stated in the cable to Washington.  “Mayer [Thomas Mayer is Chief Economist of Deutsche Bank Group] proposes a ‘Chapter 11 for Eurozone countries,’ which would place troubled members under economic supervision until they put their house in order.”

Under these bizarre circumstances, a blog entry by Pippa Malmgren, former economic adviser to President George Bush (George II), has been given some traction since her post about her thoughts on the euro, in September.

She believes that the Greeks will default, the euro will fall, the Germans will walk, and gold, oil as well as other commodities will soar.

She writes, “Greece defaults. . . The Germans announce they are re-introducing the Deutschmark. They have already ordered the new currency and asked that the printers hurry up.”

As a result, she add, “Gold, diamonds, agricultural assets, energy prices and mined asset prices will rise. Default reduces the debt burden and allows growth and inflation to return.  If central banks (other than the ECB) throw huge liquidity out into the market because of this event then the liquidity is going to lean away from paper financial assets other than the most trusted and liquid (U.S. Treasuries), and lean toward hard assets.”

Anyone wondering how the U.S. Treasury intends to come up with $628 billion by Mar. 31, 2012, to keep the illusion of the U.S. dollar alive without herculean efforts by the Fed’s balance sheet may see the crisis in Europe as possible or partial answer.  As German protects itself from another Weimar, the U.S. needs a solution to its own reichsmark.  So far, the dying PIIGS have provided Treasury a temporary one.