Little Doubt! $3,500 Gold Price, a Minimum

By Dominique de Kevelioc de Bailleul

To the ‘man on the street’, a price target of gold $3,500 must sound to him like the typical hyperbole of gold peddlers.  It must; sentiment of the gold-market-ignorant American public of the future price of gold still remains  low.

As Bill Murphy’s GATA has said, “They don’t even know how to spell gold.”

That’s because the public really has to see the effects of the Fed’s QEs.  In fact, a relatively few Americans haven’t an idea what so-called ‘quantitative easing’ truly means to him, personally, just as few understood similar Fed monetary practices orchestrated by Arthur Burns and William Miller during the inflation-roaring ’70s.  But he sure will see how inflation is eroding his lifestyle in the coming months—starting with a much higher oil price, and his coincidental savior, gold.

But something convenient for the monetary ‘authorities’ just happened.

A day before Bernanke pulls the trigger on indefinite purchases of mortgage-back debt, anti-American sentiment suddenly flares up in the Middle East and North Africa.

Coincidental?

The thinking behind the “there’s no such thing as a conicidence” may be driven by the assumption that Bernanke and his handlers knew that during the aftermath of the collapse of Lehman, AIG and the rest, the talking point, that the threat of another dip in the housing market will lead the U.S. economy into ‘deflation’ can only be told for so long.  Bernanke knew that food and energy prices are poised to soar faster than these dollar-sensitive ‘things’ rose during the 1970s.

Thinking that the Fed believes its own BS regarding the living costs of the average American reveals profound ignorance of the Fed’s real mandate, especially at this late stage of the Kondratiev debt cycle.  That mandate is: to protect its member banks.

And protected they will be.  With the Fed coming in at the last moment to cope with the mess at JP Morgan and Morgan Stanley, the effects of an addition of $1.3 trillion (estimated by the close of calendar year 2013) expansion of the central bank’s balance sheet in the coming months will necessitate a new mantra from the Fed and MSM to now explain rapidly increasing food and energy prices during a global recession.

This time, China, alone, can no longer be blamed for stubbornly high oil prices.  Its economy is dropping like a stone, too.  Therefore, a new scapegoat for the future price of $150 to $200 per barrel of oil will emerge in the Middle East and North Africa, instead.  It will be called, either the “Arab Fall” or “WWIII”.

With the latest Fed announcement, it should be abundantly clear by now: the Fed is intentionally debasing the dollar, and it appears that the central bank will continue to debase the dollar until it fears a currency collapse—a course that Ron Paul said is a “detachment from reality,” after hearing of the press release of Fed’s FOMC meeting decision, Friday.

The Fed lives in reality, and it knows what it’s doing many months ahead of a carefully coordinated plan of public distraction.

There’s little doubt; gold will take off and begin the final stage of this tremendous secular rally.  Today’s low sentiment among mom and pop for holding gold will change this year and accelerate in 2013, taking gold to great heights.  Gold has reached new highs against the Indian rupee and near-highs priced in euros.

As far as the dollar, an ultimate price target for the gold price of $2,000 will turn out to be much, much too low.  It’s much more likely that Egon von Greyrz’s target price of $3,500 to $5,000 within 18 months will make much more sense, in retrospect.

Here’s why.

The following chart provides a rational for a target gold price of $3,500.

As an example of the Swiss economist and money manager Marc Faber comments about the effects of inflation, the chart (above) shows that inflation doesn’t manifest in all markets at the same time.

In the chart, the data show inflation had flowed into the oil market months following the peak in the gold price at the end of 2011 through to today.  The expected next rally in the gold-to-oil ratio is poised to test the Aug. 2011 high of 24.  But, instead of oil surging while gold was coming off its Apr. 2011 all-time high, today, both ‘commodities’ are expected to move much higher as a result of QE++, with the gold price outperforming the oil price by a considerable clip.

With predictions of a minimum oil price of $150 as a result of the Fed’s new QE-to-no-limit plan (to north of $200 in the event of an attack on Iran) and the multiple of the all-time high gold-to-oil ratio of 24 applied to the oil price, the gold price calculates to $3,600.  In the event of a $200 per barrel handle, $the target price moves up to $4,800.

Jim Rogers & Marc Faber Agree, Bombs Away

By Dominique de Kevelioc de Bailleul

Investors waiting for an official announcement of another round of Fed balance sheet expansion may be losing ground in the next leg up in precious metals prices—and in oil and other commodities prices.

Don’t wait for the shot to be heard.  Place your favorite dollar-destruction trade now before the mom-and-pop investor as well as the institutional money manager catches on to the next stage of deceptive practices of the Fed.

There’s no alternative to more money ‘printing’, according to Jim Rogers of Rogers Holdings and Marc Faber of Marc Faber Limited.

In the case of Rogers, he says the Fed desperately wants to avoid more “egg on their face” after two QE mistakes, while both men lead the publicly stated  comparison between Bernanke and his lead neo-Keynesian cheerleader Paul Krugman with France’s 18th century John Law.

“I do not know whether they will announce it [QE3] or not. They are a little bit embarrassed because they announced QE1 and QE2, and it did not work. So they may try to discuss it,” Rogers told the Economic Times.

“They may just continue to do it without getting egg on their face again, but they are going to print money, they are all going to print money,” he adds.  “It is the wrong thing to do, but that is all they know to do.”

Once a complimentary Fed policy tool for orchestrating global money flows, the coordinated actions to manipulate interest rates and issue communiques have now become a huge liability for Bernanke.

It’s now become apparent that $2.1 trillion of officially-disclosed money creation since the onset of QE1 in Dec. 2008 has not delivered that reliable Keynesian magic as hoped.  Instead, much of that fiat merely spilled over into the commodities and precious metals markets, in addition to propping up insolvent banks and U.S. stock markets.

As the monetary base expands while real GDP contracts, the Fed must now downplay the evidence of monetization from the layman the best it can.  Otherwise, the Fed becomes completely irrelevant to harnessing the market from the superhighway of hyperinflation.

“If you look at their balance sheets, you will see that something is happening, assets are building on their balance sheets and they are not coming from the tooth fairy,” says Rogers.

Early last week, Rogers told The Daily Telegraph that Bernanke & Company “probably have learned how to do things off balance sheet.  I have nothing to confirm this, but everyone else has learned how, so they probably have, too. This is just a comment on human nature.”

The Swiss money manager Marc Faber agrees with Rogers’ on the outlook for the Fed’s money printing activities in the wake of $1.5 trillion U.S. budget deficits—along with no plan in sight to drastically cut military and ‘entitlement’ programs.

With more wars on the horizon and an American political class comprised of two parties rolled into one oligarchy in bed with bankers, Washington’s will to alter the course of runaway consumer prices through the destruction of the U.S. dollar’s purchasing power is clear—and was made most clear to those paying attention to a failed Ron Paul presidential campaign and a Simpson-Bowles impasse.

“In my opinion, as far as the eye can see, the Federal Reserve will never again implement tight monetary policies,” say Faber to a gathering at the Mises Institute.  They will print and print and print.”

Faber goes on to say that the neo-Keynesians don’t acknowledge that excessive leverage and levels of debt in the financial system are the root cause of the four-year-long global recession, pointing out an eight-page dissertation by economist Paul Krugman published by the NYTimes.

In Krugman’s article, not one mention of the problem of an over-leveraged banking system and excessively indebted economy was made,  lead Faber to believe that the implication is: more of the same monetary drug is recommended.

“They cannot afford to have a debt deflation in a credit addicted economy,” Faber continues.

Thousands of years of monetary history show that the road to hyperinflation is political driven, with no politician or central banker (in the case of today’s monetary system) desiring to be in the driver’s seat when the system crashes from its own weight.  Each elected and appointed policymaker knows that the ramifications of hyperinflation include civil unrest, violence and revolution—either peaceful, or not.  The targets will be on their backs.

“I tell you, sovereign credit in the Western world, they’re all bankrupt,” states Faber.  “But before they officially go bankrupt and can’t pay, they’re going to print money and massively so.  That should be very clear.  That’s the easiest way politically to postpone the hour of truth.”

Americans may fear the truth, but they haven’t experience the pain that goes with that truth—a la Greece, Spain and Italy, to mention a few.  As the market for Spanish and Italian sovereign debt now soars along with precious metals, the markets agree with Rogers and Faber: there’s virtually no turning back for the Fed and its complicit partners in monetary crimes, the ECB, BOJ, BOE and SNB.

Marc Faber Agrees, ‘Get the Hell Out’

By Dominique de Kevelioc de Bailleul

The message to investors should be most clear by now: Quickly get your cash out of financial institutions and buy some gold.

“It’s very dangerous to put everything in cash with MF Global or another financial institution, because I’m not too sure about the law . . . if the law will protect you as a depositor or an account holder,” editor of the Gloom Boom Doom Report Marc Faber tells Bloomberg.

Whether the messenger comes way of an up-straight and straight-up N.Y. City Italian, an exiled American living in Central America, a young woman totting firearms and a Bible, or an eccentric Swiss-born money manager living in Chiang Mai, Thailand, each warn investors and savers that cash on account is not safe at financial institutions—no matter how much the FDIC or SIPC insures.

Gerald Celente, Jim Willie, Ann Barnhardt and, now, Marc Faber warn the runs on Greek, Spanish, Italian and several Eastern European banks will eventually come to the U.S.  And if investors and savers think they’re covered in the event of a failure, a media-downplayed ruling by United States Court of Appeals for the Seventh Circuit of Aug. 9, regarding the bankruptcy case of Sentinel Management Group, too many will come to know that their cash is most definitely exposed to what many say is legal theft.

“The system is rigged. . . if you don’t have it [assets] in your possession, you don’t own it,” said Celente, following word that his commodities brokerage account was seized in Jon Corzine’s MF Global bankruptcy of Oct. 31, 2011.

“JPM has seen fit to gobble private accounts at both MF Global and PFG-Best, with regulatory blessing as the courts sprinkled fascist holy water,” writes Jim Willie of the Golden Jackass newsletter.

“If you don’t understand what ‘get the hell out’ means, there’s not much I can do for you,” Ann Barnhardt commented, after hearing of the Seventh Circuit of Appeals ruling.

In the case of Sentinel, its creditor, BNY Mellon, contended that its secured loan with the Chicago futures brokerage firm takes priority over other loans which may have been secured by Sentinel’s pledge of allocated accounts.

“The appeals court affirmed an earlier district court ruling that the bank had a ‘secured position’ on a $312 million loan it gave to Sentinel, which turned out to have been secured by customer money,” according to Reuters of Aug. 9.

“I don’t think that’s what the Commodity Futures Trading Commission had in mind” with its requirement that brokers keep customer money separate from their own,” Reuters quoted Sentinel trustee Fred Grede.

“It does not bode well for the protection of customer funds,” he added, “I’m sure Mr. Corzine’s attorneys will get a hold of this ruling and use it for all it’s worth.”

Other than strongly recommending that idle cash be removed from U.S. banks and broker-dealers, Faber says investors and savers, alike, should hold some gold to protect their savings from another insidious means of ‘institutional’ theft in store from them in the future: the loss of purchasing power of their Federal Reserve notes.

“I think they [Fed] will print money and that eventually everything will become more expensive. . . and I would hold some gold . . . and I would hold some equities,” he says.

“And I happen to think that one day a lot of corporate bonds will have a higher credit rating than the U.S. government [bonds],” he adds, which coincidentally comes on the same day as another Bloomberg interview with credit rating agency Fitch, who warns the U.S. Treasury of an impending downgrade, if Congress cannot outline plans sometime in the first half of 2013 to narrow a $1.3 trillion annual budget deficit.

Fed to Crash Markets Before Launching QE3

By Dominique de Kevelioc de Bailleul

Desperate to print Wiemar-style to fight off the most viscous Kondratiev Winter on record, Federal Reserve Chairman Ben Bernanke may not satisfy ‘inflation trade’ onlookers at the close of his Jackson Hole speech scheduled Friday.  He may, instead, merely allow months of anticipatory front-running of stocks do the work of propping up asset prices for him.

And if investors don’t get the ‘all-systems go’ at Jackson Hole, there’s always the FOMC meeting of Sept. 12 & 13 to get the good news.  That’s when market volatility could move off the charts, maybe extreme volatility to the downside, according some Wall Street analysts.

“With the equity market pricing in a significant chance of QE3, stock prices are no longer as useful a signal to Fed officials. Should the Fed disappoint at its September policy meeting, the risk of a stock sell-off is high,” Bank of America Merrill Lynch analysts wrote in a note to clients, Aug. 21.

“Some in the markets think that the Fed effectively targets equity prices, meaning that to predict Fed policy, one merely needs to track the U.S. stock market,” the analysts add.  “There is a curious circularity to this view, however: the Fed will not launch QE3 so long as stock prices are high, yet the stock market is high because it anticipates QE3.”

The old adage on the Street, ‘buy the rumor, sell the fact’, may be at play here. But if Bernanke plays too-hard-to-get with investors in the coming weeks, a nasty fall could be in store for the Fed chief—a fall that could outright overwhelm the NY Fed’s PPT and result in a stock market plunge akin to the Crash of 1987.  Maybe.

The chart of the S&P 500, Spanish IBEX 35 and Chinese SSEC shows the gaping chasm between U.S. stocks and two indexes represented by two economies with, again, divergent outlooks.  Spain’s fiscal outlook in coming years isn’t much different from the federal budget outlook for the U.S., while the Chinese $3 trillion war chest of reserves couldn’t be in a better relative position to survive the righting of the bogus ‘World is Flat’ global agenda.

Would Bernanke risk a market meltdown that snaps the notion of an eternal ‘Bernanke put’?  Is he that confident that the remaining holdouts of an obviously rigged market will plunge the world economy into the anticipated financial Armageddon—before a U.S. presidential election?

The answer may be a shocking, even cockamamy—YES and YES!  And it may not be that much of a risk.  A surprise ‘not yet’ to further money printing at Jackson Hole and the FOMC meeting could be forthcoming.

Consider the geopolitics in the Middle East, and contemplate the dire political tug-o-war between Israel’s Prime Minister Benjamin Netanyahu and U.S. President Barrack Obama regarding Iran.  Netanyahu insists military action against Iran be taken before the U.S. election in November, while Obama remains adamant that the issue surrounding Iran must wait until after the election—a stand which probably infuriates the warmongering neocons and bankers, who have since put their stock on Republican candidate for president Mitt Romney as their next bankster puppet.

And the white-hot ambitious, some say, narcissistic, Romney won’t be taking any chances leading up to what is expected to be a close election, if recent polls serve as a guide.  He may need a little help from a financial catastrophe to convince enough voters that they may have to believe in a different kind of change.

But first, Romney must take the pledge—for the record.

Jul. 29, he told a gathering of Israelis in Jerusalem:

“We serve the same cause and we provoke the same hatreds in the same enemies of civilization. It is my firm conviction that the security of Israel is in the vital national security interests of the United States . . .

“Israel and America are, in many respects, reflections of one another.  We both believe in democracy, in the right of every people to select their leaders, and choose their nation’s course. We both believe in the rule of law, knowing that in its absence, willful men will be inclined to oppress the weak. We both believe that our rights are universal, granted not by our government, but by our creator.”

Later in the speech, Romney spoke the magical words that signaled the Netanyahu regime that he, not Obama, is your man.

Stopping Iran from acquiring nuclear weapons “must be our highest national security priority” and “we must use any and all measures” to destroy that capability.

“Containment is not an option,” Romney added.

And because “both men [Obama and Netanyahu] share a deep dislike and distrust of each other,” writes Anshel Pfeffer of the leftist Israeli newspaper Haaretz, the Israeli and Anglo-American mutually aligned partnership in the petrodollar wars must not be jeopardized by a Commander and Chief not willing to do what’s necessary, in the eyes of the neocons, of course.

Therefore, Obama must go, leaving the banking cartel’s lead man at the Fed, Bernanke, to continue manipulating the markets, but this time, to the downside to throw the game for Romney and the neocons at this critical moment (for Israel) in the Middle East.  Bernanke can always come in with a bazooka money blast and ‘make things better’ for Wall Street while putting that one last lid on the gold price (maybe) before the out-of-control launch of the yellow metal truly begins during the first year of a Romney first term.

“If the S&P drops 150 or 200 points, you can be sure that there will be more QE, not only QE3 but QE4 and so forth,” Swiss money manager Marc Faber tells GoldSeek Radio this past weekend.

But, not to worry. QE is coming, but a little politics comes first to nail down decades-long geopolitical strategy in the oil patch concerning a much bigger war between the U.S., Russia and China regarding the U.S. dollar and the gold price.

Though Faber doesn’t speculate on the upcoming Fed actions, he does state “it’s premature to say that this a genuine breakout” in gold and silver, and I “say that with great confidence.”

Silver to Breakout Amid Odd Forecast—Ben Davies

By Dominique de Kevelioc de Bailleul

“We’re trend ready, Eric.  I think it’s a prescient time to come on the show,” Hinde Capital CEO Ben Davies begins his interview with King World News (KWN), referring to a resumption of the upward trend in the gold market.  But, where gold goes, silver follows at a ‘double-time’ pace—at least.

Davies proprietary model for pricing silver suggests to him a move higher of 25 percent, citing reasons of a slight upturn in the U.S. economy, the return of easy-credit European politicians from vacation, and, possibly, truth in the rumor that Spain will ask the ECB for a bailout during the weekend, ending Aug. 19.

On the news of a Spanish capitulation, alone, silver prices could move higher this week, according to Davies.

Though Davies doesn’t expound upon his ‘odd’ thesis of U.S. growth next year, or even suggest where that growth will come from, he does expect, however, more monetary accommodation by central banks to buoy silver prices—an expectation echoed by currency and monetary policy expect Jim Rickards, who, so far, has been on the money with his prediction of ECB easing ahead of the Fed.  Now, it’s the Fed’s turn, according to Rickards.

Incidentally, Rickards anticipates Fed Chairman Ben Bernanke to announce further QE at the annual central bankers meeting at Jackson Hole, Wyoming in early September.  He tweeted, Sunday, that recent weakness in the Chinese renminbi against the dollar weighs more heavily with the Fed than U.S. jobs and GDP, and that downdraft in the Chinese currency, beginning from the first days of May, will push Bernanke to make the long-awaited QE announcement at Jackson Hole.

Moreover, it turns out the rumor that Spain would ask for a bailout, that Davies alludes to, is fact-based, in part.  The Wall Street Journal reports, Sunday, Spain’s Finance Minister Luis de Guindos “would like to see the European Central Bank commit to massive, open-ended sovereign-debt purchases” before Spain asks for a new bailout from the central bank—a request that former Goldman Sachs operative Mario Draghi would only be too happy to accommodate.

However, Spain and the other nations which make up the PIIGS will await Germany’s high-court ruling on whether an exception to Germany’s constitution will be granted on behalf of the ECB and its sovereign debt purchases.  That critical ruling is scheduled for Sept. 12.

Back to Davies.

When asked by KWN host Eric King about the short-term prospects for the silver price, Davies didn’t hang his hat on the central-banker-easing mantra as the primary reason for his anticipation of higher silver prices.  Instead, Davies emphasizes a disconnect between elevated equities prices and depressed silver prices as his reasoning for silver to play catch up.

He also suggests that U.S. economic growth will add to the several known catalysts to a substantial move higher in the silver price, a shocking departure from the 2013 Armageddon scenario advanced by Jim Rogers, Marc Faber, Peter Schiff and a legion of well-informed, talented and ‘unencumbered’ market handicappers, including, too, economist John Williams of ShadowStats, who would take grand exception to Davies’ U.S. economic forecast.

Flying in the face of Davies’ forecast of economic growth comes an American Petroleum Institute (API) article which reports global fuel deliveries for all products dropping through the floor—not a good sign.

From API:

Demand for gasoline, the most widely used petroleum product, dropped 3.8% from a year earlier, to 8.624 million barrels a day, the lowest July level since 1997. Gasoline use in the heart of the peak summer driving season was 2.2% lower than in June. January-July gasoline demand averaged 1.1% below a year earlier, at 8.671 million barrels a day, the API said.

Kerosine-based jet fuel use fell 0.8% in July from a year ago, to 1.455 million barrels a day, while demand for heavy residual fuel, used in power plants and industrial burners, dropped 7.1% year-on-year, to 294,000 barrels a day.

Production of all four major products–gasoline, distillate, jet fuel and residual fuel–was greater than demand for those products. As a result, petroleum imports decreased and exports increased. Total imports of crude and refined products fell by 9.6% to average 10.4 million barrels a day in July. Exports of refined products increased 11.1% to a record high for July of 3.244 million barrels a day, and year-to-date exports were up 14% compared with the same period in 2011.

Refineries operated at 92.7% of capacity in July, the second month in a row above 90%.

Crude oil production rose 13.6% year on year in July to 6.225 million barrels a day, the highest July level since 1998. Year-to-date output averaged near the July level and was up 11.9% from the same period in 2011.

Nonetheless, Davies likes silver, in the short-term.

“Silver is the ugly duckling at the moment.  Isn’t it?  It’s definitely performing very badly, and I think it’s tantamount to the same as gold,” says Davies.  “But I think I would err slightly on the side of more silver bullish.

“I think that with recent equity and S&P 500 performance, I think that the strong correlation there and optimism for growth, and, actually, our analysis is actually [sic] for a pick-up in U.S. growth in nine months time.  So the overlay there, for us, is that silver could perform well here.”

Davies’ timing for a move high in the silver price pretty much sacks up with Goldmoney’s James Turk and other frequent guests of KWN.  It’s a breakout any day in both gold and silver, they say, with silver expected to catapult quickly and close the 57-to-one ratio of the two metals.

“I think we’re threatening to make a move here and it could come in the next few weeks if not sooner,” proffers Davies.

“Optically [chart], I’m looking for the low-to-mid-30′s, and that is as far as our trend system will take us in the interim—in the short term, I should say.”

His target for gold of $1750 and silver of $33-$35 equates to a gold:silver ratio of between 50 and 53.

STOCK CRASH ALERT: Strange Indicator Spells Doom

By Dominique de Kevelioc de Bailleul

“The charts look terrible,” eccentric technician Arch Crawford told GoldSeek Radio host Chris Waltzec on Tuesday.

But the unusual methods of planetary alignments and astronomical technical readings which Crawford utilizes to make his predictions should not be scoffed as the work of a lunatic.  His successful 25-plus-year track record and large subscriber base speak for themselves.

“There have been five-year periods along the way when Crawford’s timing was at or near the top,” according to Forbes Newsletter Watch, 2002.

The prestigious Hulbert Financial Digest ranked Arch Crawford’s Crawford Perspectives no. 1 for Stock Market Timing for the period October 1 2007 through October 31, 2009.  In addition, his researching into correlating market action with astronomical cycles and sun activity, Crawford has achieved fame for ranking at the top of his peers for the years 1987, 1994 and 2008.  He ranked no. 2 for 2002.

Aside from a ‘normal’ year during 1994, Crawford has achieved the best of the best during years of severe market turmoil and vicious declines, suggesting that maybe stock investors should pay very close attention to his latest call.

“The highest number of electrons for the longest period of time that I’ve ever seen on record prior to this year was the week of the crash of 1987,” Crawford explains, referring to electrons reaching the earth caused by geomagnetic storms erupting from the sun.

“The number of electrons at the Geostationary Operational Environmental Satellites (GOES) geosynchronous satellite level was . . went over 10-to-the-third (1,000) per cubic centimeter about a week before the crash, and the market was dropping every day,” he continues.   “And the day after the crash day, that morning was the actual low in the price, and the electrons dropped back under 10-to-the-third per centimeter that day, and that was the bottom.”

Crawford states that the amount of electrons reaching the earth from the sun on a per cubic centimeter parameter metric reaches 1,000 per cubic centimeter on very rare occasions and for relatively short periods of time.  But this year, the year of the Mayan calendar end, something most unusual is happening right now, according him.

“There have been very rare occasions when they’ve been over 10-to-the-third per cubic centimeter for any period of time,” he says.  “Well, they’ve been over 10-to-the-third for most of this year and has been as high as 10-to-the-fifth, which is a 1,000 times stronger.  Excuse me; I guess, it’s 100-times stronger.”

And it gets worse for the future of the DJIA, yet, according to Crawford.  In addition to the electron density of the earth’s atmosphere reaching red-line readings, another astronomical cycle has moved into place—an ‘indicator’ which has been his bread and butter tool for 25 years for predicting successfully stock market crashes.  That predictor is the Mars-Uranus cycle.

“The Mars-Uranus crash portion of the Mars-Uranus cycle has just become active on July 18, and that means that, well, for the last hundred years every crash that has taken place in the market has taken place in the same 40 percent of that cycle,” Crawford explains.

“And that’s a several-month window, which is not saying it will crash tomorrow, or it crashes at the end of February,” he adds.  “But between 18th of July and the end of February, I believe the markets worldwide will crash.  And that’s because, that if, any one of them falls, it’s going to take a bunch of others into a black hole.”

Interestingly enough, Swiss economist and money manager Marc Faber told Russia Today on the same Tuesday of this week that he, too, sees the potential for a 1987-style stock market crash.

“I think there’s a possibility that there will get some kind of a crash” in stocks due to the disconnect between the lofty U.S. stock market levels and the rest of the world’s depressed levels, Faber told RT.

Source: GoldSeek Radio

UBS: Hyperinflation Nears; Gold, the Canary in the Coalmine

By Dominique de Kevelioc de Bailleul

Swiss-based UBS AG issued a warning to clients Wednesday that the U.S. is on the path of a hyper-inflationary depression.  Forty years of a nation’s currency not redeemable for a physical asset has just about reached its limit of usefulness, according to the world’s 17th largest bank (ranked by assets) and its economist Caesar Lack, Ph.D. economist.

In Lack’s note to investors, titled, Global Risk Watch: Hyperinflation Revisited, he states:

Hyperinflation: Paper money only has a value because of the confidence that the money can be exchanged for a certain quantity of goods or services in the future. If this confidence is eroded, hyperinflation becomes a threat. If holders of cash start to question the future purchasing power of the currency and switch into real assets, asset prices start to rise and the purchasing power of money starts to fall. Other cash holders may realize the falling purchasing power of their money and join the exit from paper into real assets. When this self-reinforcing cycle turns into a panic, we have hyperinflation. The classic examples of hyperinflation are Germany in the 1920s, Hungary after the Second World War, and Zimbabwe, where hyperinflation ended in 2009. Indeed, hyperinflation is not that rare at all. Economist Peter Bernholz has identified no fewer than 28 cases of hyperinflation in the 20th century. [emphasis added]

Lack’s overview of the events which lead up to a currency collapse comes straight from the work of Austrian economist Ludwig von Mises (1881-1973), an economist shunned by the establishment’s money masters for his heretical economic viewpoints, and scoffed by today’s confused legion of ‘expert’ economists, media personalities and political figures such as deficits-don’t-matter Dick Cheney.

Americans will soon find out that deficits, indeed, do matter, says UBS.

Just as a student pilot is told to trust his flight indicators and not the sensations brought about by his inner ear, the readings of hyperinflation stare each investor in the face—if he’s trained to ignore the likes of the establishment’s head cheerleader Paul Krugman, and, instead, interpret what the economic indicators tell him from the standpoint of the obscured von Mises.

As von Mises pointed out, hyperinflation is not a result of a money supply gone wild through the excessive printing of paper notes, per se; it’s the result of a marketplace of participants suddenly rushing out of a monetary system which they perceive no longer works or can be trusted.  MF Global, PFG, LIBORgate and, now, hints of fraudulently managed ‘allocated’ gold accounts surfacing, all contribute to that cumulative, then sudden drop in confidence in the U.S. dollar.

As repeated attempts to audit the Fed regain renewed support in Congress, policymakers are under pressure by a public—a public that now questions the once-sacred, enigmatic and arcane central bank’s role as the steward of the nation’s money.  As congressman Ron Paul stated in an interview with GoldSeek radio during the weekend, another bill to audit the Fed makes its way through committee.  The issue has mushroomed in popularity with constituents, therefore their representatives, and can no longer be ignored, according to Paul.  The issue of the Fed won’t go away.

And the last step toward hyperinflation comes from a public that comes to realize that, in fact, deficits do matter and that four decades of deficit spending has reached its limit in the U.S.  The realization of American exceptionalism, as it relates to matters of fiscal responsibility, was just another propagated myth could come as early as next year, according to many students of the Austrian-school, such as Jim Rogers, Marc Faber, John Williams, Peter Schiff, Max Keiser, James Turk, Eric Sprott, among others.  As the U.S. economy rolls over, federal tax receipts will drop further, gaping an already monstrous $1.5 trillion deficit ($5.3 trillion, including unfunded liabilities) into a Greece-like death spiral.

“Ultimately, hyperinflation is a fiscal phenomenon; that is, hyperinflation results from unsustainable fiscal deficits,” states UBS.  “Peter Bernholz [author of Monetary Regimes and Inflation: History, Economic and Political Relationships]

notes that historically, cases of hyperinflation have been preceded by the central bank monetizing a significant proportion of the government deficit.

“After investigating 29 hyperinflationary episodes, 28 of which happened in the 20th century, Bernholz writes: ‘We draw the conclusion that the creation of money to finance a public budget deficit has been the reason for hyperinflation.’”

Reruns of Cheney video clips will be used by some as a reminder of how fiscally, politically and morally bankrupt American culture has become.  It will dawn on a larger and more meaningful portion of Americans that the promise of a trip on the train to the American dream was really the boxcar to the slaughterhouse.

That flashpoint worries the Fed and the oligarchy (witness the Warren Buffett, Charlie Munger and Bill Gates interviews with CNBC’s Becky Quick), as confidence in American institutions will be irredeemably lost, leading eventually to that fateful day of hyperinflation.  Just as 28 other currencies before, another currency, the dollar, will end up as the next worthless fiat.

The bizarre series of Executive Orders and other unconstitutional steps taken by all branches of government since 9-11 tip the hand that central planners have  been preparing for that day of awakening.  The anger generated by a public armed to the teeth most likely will trigger panic and another American Revolution.

UBS ends with:

Gold – the canary in the coalmine

Due to its long standing as the foremost, non-inflatable, liquid alternative currency, gold is the first destination for wealth fleeing from paper money into real assets. Gold can be considered a hyperinflation hedge, and its price can be considered an indicator for the probability of hyperinflation. A sudden rise in the price of gold would be a warning sign that the risk of hyperinflation is increasing, in particular if it went along with a worsening of the fiscal situation in the deficit countries and an easing of monetary policy. Not only gold, but also other commodities, as well as the stock market, would profit from investors fleeing from money and from government debt. Thus a strong rise of gold, commodities, and stock markets, accompanied by a fall in the currency and in government bond prices (i.e. a rise in yields) could signal the approach of hyperinflation. We will continue to monitor global inflation developments and change our risk assessment in the global inflation monitor according to current events.

Peter Schiff: A Much Bigger Collapse is Coming

By Dominique de Kevelioc de Bailleul

Euro Pacific Capital CEO Peter Schiff received top headline on Yahoo Finance News Tuesday, encouraging investors to loading up on gold and silver before the rush from global investors into precious metals becomes the only game in town.

The global financial crisis will inevitably move to the other side of the Atlantic to the U.S., as the focus on the dollar’s terrible fundamentals once again puts pressure on the Treasury market.  And when that day comes, the selling of US debt and market turmoil it will ignite will dwarf Europe’s sovereign debt catastrophe, according to him.

“We’ve [U.S.] got a much bigger collapse coming, and not just of the markets but of the economy” Schiff tells Yahoo’s Breakout host Jeff Mack. “It’s like what you’re seeing in Europe right now, only worse.”

In agreement with Swiss economist Marc Faber and commodities trader Jim Rogers, Schiff predicts the Depression of the U.S. economy will deepen some time in 2013.

As the Fed responds with more aggressive QE to prop up banks, in addition to maintaining historically record low debt carrying costs to Treasury, investors will most likely come to realize that the Fed has become powerless to affect any positive outcome to the crisis.  More jobs will be lost, tax revenue to the Treasury will fall, and deficits will soar even higher than the $1.5 trillion deficit expected for fiscal 2013.

“That’s when it really is going to get interesting, because that’s when we hit our real fiscal cliff, when we’re going to have to slash — and I mean slash — government spending,” says Schiff.

“Alternatively, we can bail everybody out, pretend we can print our way out of a crisis, and, instead, we have runaway inflation, or hyper-inflation, which is going to be far worse than the collapse we would have if we did the right thing and just let everything implode,” Schiff continues.

But Bernanke will most likely make good on his promise to economist Milton Friedman (1912-2006) during a speech the Fed Chairman made at Friedman’s 90thbirthday celebration.  In his speech, Bernanke relived the Fed’s monetary policy responses to the financial crisis of the 1930s, and praised Friedman for pointing out that the Fed’s restriction of money supply to stem the flow of gold out of the United States was a mistake.  The Fed, instead, should have increased money supply to save the banking system and move off the gold standard (as Britain did earlier in the crisis).

“This action [raising of interest rates] stemmed the outflow of gold but contributed to what Friedman and Schwartz called a ‘spectacular’ increase in bank failures and bank runs, with 522 commercial banks closing their doors in October alone,” Bernanke said At the Conference to Honor Milton Friedman, University of Chicago, Chicago, Illinois .

“The policy tightening and the ongoing collapse of the banking system caused the money supply to fall precipitously, and the declines in output and prices became even more virulent.  Again, the logic is that a monetary policy change related to objectives other than the domestic economy–in this case, defense of the dollar against external attack–were followed by changes in domestic output and prices in the predicted direction [down].”

In 1931, the gold price was fixed at $20.67, making it a bargain to holders of U.S. dollars if the Fed had acted by debasing the dollar.  But instead, the Fed decided to protect the dollar from “attack” by domestic and foreign holders, a policy move that Schiff believes is in the best interest of the U.S. economy, today.

That’s not likely to happen, however.  It’s clear from the passage, above, of Bernanke’s entire speech that Bernanke will sacrifice the U.S. dollar in the hopes of saving the banking system; he believes it’s a small price to pay to prevent the decimation of the banking sector—the very point of Friedman’s lifetime of work.

“Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve,” Bernanke ended his speech.  “I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry.  But thanks to you, we won’t do it again.”

And Schiff takes Bernanke at his word, and recommends that investors buy gold and silver before “Helicopter” Ben makes good on his promise to Milton Friedman of 10 years ago.

CNBC Interview: Warren Buffett Shows Fear

By Dominique de Kevelioc de Bailleul

In one of the most revealing interviews with the man who has always been optimistic for a continued prosperous America, Berkshire Hathaway Chairman Warren Buffett, for the first time, appears noticeably fearful about the future of the U.S. economy.

Buffett cult members must have noticed his more-than-usual speech stammer as he searched for the right words in response to questions posed by CNBC’s Becky Quick—who, incidentally, is one of CNBC’s softest of softball interviewers.  In contrast, a Buffett interview with Rick Santelli would most likely drop the Dow 1,000 points within the first few minutes of questioning.

There’s little doubt, if you read between the lines of Buffett’s responses to questions from stick-figure journalist Becky Quick, it’s time to head for the hills and buy gold, gun and take up God.  The 81-year-old investor had nothing good to say about the U.S. economy—a first for the Orifice of Omaha.

When Quick asked whether Buffett’s optimistic assessment of the U.S. economy of six weeks ago is still on track, Buffett began with a mea culpa nervous laugh, as if to say, ‘Oops, I misread the tea leaves.  Sorry fans; this thing is going down.’

Stripping out the filler and avuncular chit-chat ‘Uncle Warren’ persona, the cold-hearted Nebraskan is saying that the outlook for the U.S. economy is not good—just as Jim Rogers and Marc Faber have warned investors many months ago.  In fact, if Buffett wasn’t such a cheerleader for the establishment—the establishment that has feathered his nest for so many years—he’d stop treating investors with disdain though his condescending obfuscations to direct questions and hokey homilies of America the Beautiful—and come clean with investors.

Not Warren.  Joining the Washington mafia is for life.  No exceptions.

“Well, I’ve got a little different story this time,” Buffett chuckled, and went on to say that he’s been looking for a turnaround in the economy for more than two years, but nothing stands out as a potential catalyst of future growth.  The GDP stall, back to flat-line, hasn’t been led by any particular sector; “ . . . it’s pretty general,” he said.

Quick asked, “Well with everything else — not a reversal, a slowdown in the growth, what happened? What happened six weeks ago to spook people, to spook businesses?”

Buffett responded, disingenuously, of course,  “I don’t know the answer to exactly why it’s happening. And I don’t know what it will be three months from now or six months from now because three months ago I didn’t know what it would be today.”

The Sergeant Schultz of billionaires doesn’t know what Jim Rogers knows, or Marc Faber knows, or Peter Schiff knows—and Max Keiser, Eric Sprott, John Williams, Ben Davies, James Turk and about a dozen regulars of Eric King’s King World News.  Buffett knows nothing, the Hogan’s Goat of Washington.

As the mountain of sovereign, corporate and personal debt chokes the economy—while the Fed won’t allow the markets to clear with its ZIRP policy—while the dollar debases at rates never seen since the Civil War, Buffett knows nothing of why the U.S. economy isn’t miraculously recovering from the post-Minsky Moment.

Lies through omission are still lies, Uncle Warren.

In short, the 81-year-old ‘legend’ has turned into a ‘has-been’ overnight.  Or better yet, Buffett the oligarch is about to tank along with the U.S. economy, American exceptionalism, his Cadillac, his ice cream cones, See’s peanut brittle, and his phony blue-collar flag-waving imitation.

Instead of fighting the good fight throughout his storied career to prevent the U.S. from sinking into a fascist plutocracy, like the humble Texan Ron Paul has for three decades, maybe Buffett would gain some respect from other analysts who’ve been too busy being told they’re doom-and-gloomers, nut cases and extremists by the ‘prestitutes’ of main stream media.  While Ron Paul was telling it straight, refusing Medicare payments from his elderly patients during his time as a practicing physician, Buffett smiled, chuckled and played paddy fingers with Charlie Munger and the boys in Washington who bailed him out with TARP.

Recall Uncle Charlie Munger’s comment about goldbugs.  May 7, he said on CNBC, with who else, but the Tokyo Rose of the oligarchy, Becky Quick, “Gold is a great thing to sew onto your garments if you’re a Jewish family in Vienna in 1939 but civilized people don’t buy gold – they invest in productive businesses.”

And another oligarch, George Soros, should know exactly what Munger is talking about.  Through his own admission, the teenage Soros turned in Jews to the Gestapo during the reign of the Third Reich in the 1930s.  Soros is civilized, but people escaping the tyranny of Nazi Germany or 21st century America are uncivilized cattle.  But, then again, Soros owns gold, hedging again from tyranny.

What a cast of characters.

Back to Buffett, who said this about JP Morgan gold cartel kingpin Jamie Dimon, “I think Jamie Dimon is one of the best bankers in the world.”

Sure, and Bernie Madoff was one of the best fund managers, too, until it was discovered that Bernie’s phony profits were just that, phony, a smaller Ponzi scheme than the one managed by a man at the helm of America’s largest bank.

“There’s No Way You Can Bet Against America & Win,” Buffett had said in his previous interview with Quick of six weeks ago, which begs the question: What America is he talking about?  Central America?  Those are the strangest words from a disgrace of a man who was ashamedly Made in America.

Source: CNBC

Roubini: “Global Perfect Storm” Leads to “Hanging Bankers”

By Dominique de Kevelioc de Bailleul

What Zerohedge stated is a “must watch 9 minutes of reality,” Dr. Doom Nouriel Roubini, Monday, broke the bad news about the global economy to Bloomberg News.   That day, the day that everyone has been hoping to avoid is now unavoidable.  No later than 2013, the world will know how hard the collapsing Ponzi scheme will crash, which, according to him, will be much worse than 2008, if that can be imagined following nearly seven decades of successful central banking policy maneuvers.

But first, Roubini discussed the historically-rooted social/political implications of the next crisis.  Since the beginning of recorded historical events, money changes  have been a root of social decay, crime, political oppression, revolutions and wars.  In the end, reforms and a new start are made, but not until revenge is exacted on the scourge of society—the bankers.

“Bankers are greedy; they’ve been greedy for the last hundreds of years,” said the 53-year-old self-described “global nomad.”  “It’s not a question if they are more immoral today then they were a thousand years ago, you have to make sure they behave in ways in which you minimize those risks.

“One way of doing it is to separate activities, so you minimize the conflicts of interest,” he added.  “Otherwise, this thing is going to happen over and over again.”

When asked for his opinion about the best way to manage banker greed, criminal activity and immoral behavior, Roubini didn’t mince words, a refreshing departure from comments made by analysts dependent upon the Wall Street/Washington circle of friends for a paycheck.  Criminal behavior should be punished through appropriate and sanctioned criminal proceedings, according to him.  That assessment comes following Barclay’s ‘crime of the century’, in which, it appears no one will be criminally prosecuted for jury rigging an estimated $100 trillion worth of debt securities marked to LIBOR+.

“Well, they [jail sentences] should occur, because no one has gone in jail since the global financial crisis for any of these things,” he said in a matter-of-fact manner.  “The banks do things that are illegal, at best, a slap you know, a fine.  Some people will end up in jail, maybe that will teach a lesson to somebody.  Yeah, or maybe someone hanging on the streets.”

As far as the media and ‘official’ portrayal of the crisis, it’s all propaganda, cover up and lies, according to many financial analysts led by ‘On the Edge’ host Max Keiser, Euro Pacific Capital’s Peter Schiff, economist Marc Faber and commodities trader Jim Rogers.  Roubini strongly agrees with these men.

“Things have become worse, not become better,” stated Roubini, in direct contradiction to senior ‘officials’ at the European parliament and a complicit media from both sides of the Atlantic.  “Nothing has changed.”

After the European summit and the ECB’s cutting of policy rates, the yield on the 10-year Spanish note is back above seven percent.  “Nothing has changed,” Roubini stated, again.  The summit was a failure and the ECB’s policy move to cut interest rates had no effect on the market, according to him.  After the knee-jerk reaction of lower yields for Spanish and Italian notes of a week ago, the yields are back above the seven and six percent, respectively—a warning sign of another Greek-like sovereign debt collapse could be imminent if not attended to quickly.

Unless a “bazooka” is deployed to the problem in the eurozone, Roubin added,  “you’ll have a worse crisis, not six months from now—you’ll have another bigger crisis in the next two weeks.”

Roubini said the only way to stop the crisis is for the ECB to embark on “debt monetization,” a drastic and political third-rail issue among the core member nations of the eurozone: Germany, Holland, Austria and Finland.  Moreover, each of these nations also must overcome legal hurdles before a political decision can be made to allow the ECB to mimic the U.S. Federal Reserve’s monetization of U.S. Treasuries—an action the Fed incredulously denies.

On the question of where to find shelter before the European crisis moves from a “slow-motion train wreck” to sudden collapse, Roubini avoided the question, an interesting omission to witness for the gold bugs and other hard money advocates such as Goldmoney’s James Turk, Sprott Asset Management’s Eric Sprott, and the folks at GATA.

Roubini summed up the “perfect storm” as he sees it, delineating the major issues that will most likely overwhelm central bankers and politicians in coming months.  Incidentally, Jim Rogers has gone on the record that he, too, expects 2013 to be the year the global financial system cracks wide open.

Roubini’s concerns, of which he sees trouble brewing:

1) Slow-motion or fast motion train wreck in Europe

2) U.S. economic stall to the next leg down in the Depression

3) China landing harder rather than softer

4) Emerging markets (BRICS) sharply slowing in growth

5) Geopolitical time bomb of war between the U.S., Israel and Iran

In 2013, chances are the U.S. will decide to attack Iran, “doubling” oil prices overnight, said Roubini.  “So, it’s a perfect storm,” he said.

“Next year could be a global perfect storm,” he added.  “It’s much worse” than 2008.  Policymakers have run out of “policy rabbits to pull out of the policy hat.”  There is no “safety net” left to the system.

One day everyone will wake up and figure out that, it’s a “problem of solvency, not liquidity,” but then the damage will have already become apparent via a deeper Depression in Europe and the United States.

Roubini also predicts a complete breakup of the eurozone within five years.