Imminent Silver Price Explosion!

By Dominique de Kevelioc de Bailleul

Silver has perked its head up and sniffed the next round to hyperinflation is on the way.  Load up the truck; it’s expected to be the best ride, yet.  Here’s why:

No less than three articles penned by well-placed journalists at the ‘establishment’ rags of the Wall Street Journal, Financial Times and the Economist were launched within days of each other, with all three ‘suggesting’ that Bernanke better start stirring-up the animal spirits—on the pronto!

Jon Hilsenrath of the Wall Street Journal, the man who the straight-shooting Stephen Roach of Morgan Stanley calls the real chairman of the Fed, wrote Wednesday, following the dismal U.S. GDP report:

A few quick thoughts on GDP report out this morning:

Key price indexes are uniformly running below the Federal Reserve’s 2% objective. The personal consumption expenditures price index was up 1.6% from a year ago, thanks in part to falling gasoline prices. This is the price index that the Fed watches most closely, more so than the consumer price index produced by the Labor Department, which is running a touch higher. Excluding food and energy, the PCE price index was up 1.8% from a year ago. The Fed watches this ex-food-and-energy index to get a read on underlying inflation trends. For the quarter at an annual rate, the PCE price index ran at 0.7% and excluding food and energy it ran at 1.8%. An alternate measure, the “market-based” price index, is also running below 2%. This is ammunition for Fed officials who want to act right away to spur growth. Not only is growth subpar, and the job market stuck in the mud, inflation is also running below the Fed’s long-run goals.

Final sales of domestic product — a measure of how the economy is doing when you take out inventory swings – up at a 1.2% rate in Q2 and averaging a 1.7% rate since 2011. That’s really substandard for a recovery.

That’s the first polite salvo at Bernanke.

Now from Greg Ip of the Economist.  Ip is Europe’s version of Wall Street Journal’s Hilsenrath, but it’s all the same as far as the American-European central bank alliance is concerned, with the Depression of 1873-79, the banking crisis of 1907, the brief but deep Depression of 1921, and the Depression of 1930-1945 to serve as stark reminders that the two economies are inexorably tied at the hip.

Ip piece for the Economist was written with the point of view of an article he would write in 2021, looking back at monetary policy of 2012.  A blog entry about Ip’s piece can be found at Zerohedge.com.

In the fall of 2012, Greece abrogated its bail-out agreement with the IMF, European Union and ECB, declared a moratorium on all external debt payments, and began paying domestic bills with IOUs that it then declared legal tender. The ECB cut off Greece’s banks, Greece responded with capital controls, and relabeled its IOUs “new drachmas” which quickly plunged to 35 euro cents. Bank runs immediately commenced throughout the periphery; bond yields in Spain shot over 7%; global stock markets cratered.

The ECB was finally forced to act to save the euro: it announced it would buy as many bonds as necessary to cap all sovereign yields at 6%, with the exception of Greece. The ECB never had to buy any bonds: investors no longer had any reason to sell since the ECB had taken insolvency off the table.

Days later, the ECB president destroyed the euro shorts during a press conference.

“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro,” ECB President Mario Draghi told reports last week.  “And believe me, it will be enough.”

UBS’s Art Cashin commented on Draghi’s surprise market-moving jawbone antic:

“Mario Draghi’s comments stunned the markets,” stated Cashin.  “What prompted the timing of his move?”

Referring back to Ip’s article, Cashin continued, “Wait a minute! That [article] sounds rather close to what Mr. Draghi was discussing. Coincidence? Probably, but the timing is stunning. Somewhat like the simultaneous but separate development of calculus by Isaac Newton and Gottfried Leibniz in the early 1600′s.”

Unlike Morgan Stanley Roach’s direct style, Cashin’s more-diplomatic observation nonetheless delivers the point.

And to complete the shock-and-awe three-man series of salvos from the mouthpieces of the ‘establishment’, Council on Foreign Relations commissar Sebastian Mallaby of Financial Times wrote Tuesday:

 . . . the Fed could couple more quantitative easing with a formal announcement of a higher inflation target.  Some Fed leaders are open to this. Charles Evans, the Chicago Fed president, has floated the idea of a 3 per cent target, effective until unemployment falls below 7 per cent. A higher inflation target would lead markets to understand the Fed is committed to quantitative easing of game-changing magnitude, inducing the behavioural shifts needed to make the policy succeed.

The Bernanke Fed has been pilloried for pursuing wild quantitative easing at the risk of inflation. The truth is that it has pursued cautious quantitative easing without risking inflation. The time has come for some fresh thinking. A Fed that can escape the myth of its audacity might be able to do more.

Inflation isn’t a problem, according to Mallaby, though ShadowStat’s John Williams’ reconstruction of M2 reveals a 15 percent growth rate doesn’t quite jibe with Mallaby’s neoclassical assertion.

And according to Williams, further money printing is, not only expected by the Fed, it will lead to hyperinflation by the end of 2014.

Not too surprisingly, no one really expected central banks to repeat a Wiemar scenario so quickly, including Williams, who, after witnessing central bankers unleash the printing presses following the aftermath of the collapse of Lehman, pushed up his forecast for toilet paper money to 2014, from 2019-20.

And the conclusion that can be drawn from all of that jibber-jabber from the ‘establishment’s’ prestitutes?

FX Concepts’ currency expert extraordinaire John Taylor told Bloomberg News Monday, “I think something’s going to happen on Tuesday, Wednesday, obviously reported Wednesday,” referring to the FOMC meeting this week.  “And mostly likely it’s going to be Bernanke teasing us a little bit, you know, that QE is coming.”

“September it’s [a formal announcement of more QE] coming,” Taylor said.

Warren Buffett’s Dirty Little Secret

Billionaire investor and master of skimming life insurance premiums from young families fearful of leaving children behind with no means of support finds himself ingratiating himself with the American people in the hopes of deflecting one simple secret.  He’s a giant wolf in sheep’s clothing.

When that sudden death of fortune hit the Buffett family in 2008-9, his lack of planning for the unexpected was waived—all premiums were magically paid in full for the oligarch.  Sign-up for my 100% FREE Alerts

Your young family is too small and insignificant to matter, but the Oligarch of Omaha is too big to fail, we are told.  T.A.R.P and the higher taxes it implies down the road is essentially Buffett’s means for collecting on the back end of an unhedged empire, a gun to the head leveled by the U.S. Treasury’s collection agency—the I.R.S.  That, too, costs Buffett nothing.

“OUR leaders have asked for ‘shared sacrifice.’ But when they did the asking, they spared me,” Buffett began his Aug. 11, 2011 Op-Ed piece of the NY Times entitled “Stop Coddling the Super-Rich”.

Very clever.  He’s one of us, now, and he’s willing to pitch in for the sake of the country.  Touching, really.

Not only has Buffett been “spared” during the crisis, but he and his friends have benefited from Uncle Sam’s fascist business model for decades.  Would monopoly buster Teddy Roosevelt overlooked ‘too-big-to-fail’ mega banks, AIG and Wal-Mart’s raping and pillaging of each and every city downtown?

Now, Buffett wants, in addition to the premiums the young couple pays to him each month, he believes it’s also okay for the couple to be forced by way of I.R.S gunpoint to pay Buffett again to bailout his AIG and the dominoes of related Ponzi paper he has amassed.  That’s fascism with a chuckle, a Coke and See’s peanut brittle, and from the avuncular old man whose other monopolist billionaire friend Bill Gates finds so “loveable.”

When asked about the banking crisis on a popular daytime program, Buffett insists we stop picking on the bankers.  Why?  Because he made the exact same mistake as JP Morgan, Goldman Sachs, Morgan Stanley, as well as Citi and other NY money center banks, yet benefited from T.A.R.P no less, in fact, more, than any other human alive.

And how about Buffett’s “Buy American. I Am” article published in the NY Times in October 2008?  He reminds the reader of how bad things were in the Great Depression, but America came back.  The DJIA went from a low of 66 to 11,497.

He ends with:

I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities. Emphasis added.

Less than two years later, in 2010, Buffett is heralded by a complicit press of the fascism model as the one to follow back into the stock market.  His $34 billion “bet” on the future of America by buying Burlington Northern railroad was the feature story to a gullible American public.  If Buffett is buying “equities”, so should you, is the message.

What Buffett doesn’t tell you is that, his investment in Burlington Northern is really a camouflaged bet on inflation.  And lots of it, too.  But he sells his expectations of a much, much lower dollar as a ‘bet on America’.

Essentially, Buffett’s purchase of Burlington Northern kills several birds with one stone.

First, he is finally hedged for a decline in the U.S. dollar and further erosion of his paper empire.  In gold terms, Berkshire Hathaway class A stock is down nearly 75 percent against the arch enemy of the Fed and the U.S. dollar, gold.

But Buffett has a problem.  He cannot recommend gold; it would disrupt his relationship with the Fed and the fascist business model friends in Washington, of which, he has been the top crony and charming cheerleader—the Ted Bundy of Wall Street.

And to show his undying allegiance to the mob bosses in Washington, he made a complete fool out of himself (fraternity display of allegiance) with Berkshire Hathaway annual report diatribe against sound money, slapping the face of his father, who was a strong advocate of sound money for the people prior to “Sir” Allen Greenspan’s entrance to the hard-money chorus.

Buffett must be very big on actuarial tables.  What are the odds that the dollar defies 3,500 years of success in retaining value?  No fiat currency of the past three-plus millennia has survived—ever.  But Buffett won’t reveal the parlor trick of why he’s poo-pooing the idea.

The purchase (biggest ever for Buffett) of a railroad and its assets of land and cars will retain value during high inflation; it’s his sneaky hedge to a problem he sees coming but ain’t telling.  Inflation.

And, the best feature of all in the purchase of a railroad is: in the case of hyperinflation in America and the civil unrest it will most assuredly cause, the Feds are expected to tax real money, gold, at confiscatory rates as a form of capital control to support the dollar.  Again, it’s another job for the hit-men at the I.R.S.  But, if the military has to be deployed to protect vital infrastructure, Buffett’s railroad will be a part of that protection. Very clever.

The guy just can’t get himself to go it alone.  Buffett constantly needs a freebie by the Feds, but he wants you to believe he is a risk-taker and confident of a robust U.S. economy.  What a dirty little secret this guy lives with—and apparently he feels no guilt.  There’s a psychiatric term for people like Buffett, somewhere. Sign-up for my 100% FREE Alerts

Bernanke with ABC’s Diane Sawyer; Do You See What I See?

ABC news released a video on its site of Diane Sawyer’s interview with Federal Reserve Chairman Ben Bernanke, aired on Tuesday.  Aside from the light moments of the conversation with the veteran journalist of 60-Minutes fame, Bernanke appeared obviously strained, tired and defeated in response to Sawyer’s pointed questions regarding U.S. jobs, the economy and inflation.

A look at the written transcript of the interview reveals nothing newsworthy from Bernanke.  However, after watching the Q&A, the viewer should come away with a sense that Bernanke knows he’s lost control—a sense that market forces and politics have become too strong at this juncture of the Kondratiev cycle to avert a catastrophe.  He also knows he’s lost credibility with the international financial community. Sign-up for my 100% FREE Alerts

Watch the Diane Sawyer interview, then contrast Bernanke’s tenor with his demeanor during his Dec. 6, 2010 interview on CBS News 60-Minutes, when he assured the world of his ability to halt inflation within 15 minutes if inflation appeared to run out of control.

Notice in the Dec. 6 interview the power and confidence in his voice and posture as he confronts the question regarding the future risks to inflation from the $600 billion “quantitative easing” program embarked upon by the Fed’s QEI program in 2010.

In contrast, in his March 2012 interview, there’s an obvious lack of any noticeable confidence to any statement he makes about key points of the financial crisis, jobs or inflation.

The most telling part to Bernanke’s presentation during the ABC News appearance came late in the interview, when he was reminded by Sawyer of the statement he made on the Dec. 6 interview with 60-minutes regarding his ability to stop inflation as a result of the Fed’s expanding balance sheet.

DIANE SAWYER: You said at one point in an– in 60 Minutes interview awhile back that you felt you could control it 100%. [emphasis added]

BEN BERNANKE: No, I didn’t say that. What I– the question was– did we have confidence in the tools that we have to unwind the large balance sheet increases for example that we’ve done. And– and I– I do have 100% confidence that when the time comes to unwind– the actions we’ve taken– that we would be able to do that.

Yes, he did say that!  And he said it forcibly and in a manner intended to instill confidence with the public in the Fed’s ability to control consumer prices as a potential consequence of its ‘quantitative easing’ program.

Bernanke responds to journalist Scott Pelley during the Dec. 2010 on 60-Minutes:

SCOTT PELLEY: Can you act quickly enough to prevent inflation from getting out of control?

BEN BERNANKE: We can raise interest rates in 15 minutes if we have to . . .

SCOTT PELLEY: You have what degree of confidence in your ability to control this?

BEN BERNANKE: 100%

Maybe Bernanke isn’t so sure, after all.

Back to Sawyer.  When asked if he would accept another term as Fed Chairman, Bernanke appeared somewhat flatfooted.  He came across as if to say, “I want out.  I’m tired, and this thing isn’t working.”

DIANE SAWYER: So if– a president, whoever it is in 2014 asks you to stay–

CHAIRMAN BERNANKE: Well–

DIANE SAWYER:—would you think about it?

CHAIRMAN BERNANKE: –I’ll– I’ll– I’ll think about anything, but– basically– it’s just– too hypothetical at this point. Sign-up for my 100% FREE Alerts