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An inevitable economic collapse has been warned about since this website began over four years ago. This forecast never pretended to be able to predict its timing.
Over its existence, the website has dealt with many topics non-economic. Let me remind readers of the three key economic points that have been consistent since its beginning:
- There is no recovery nor can there be a recovery without a massive economic reset, a collapse.
- Government interventions over the last several decades have put us into this position.
- Government is now trapped and, like a wounded animal, will do anything to survive including harming the economy and those dependent on it.
The bias that we all carry is that assuming people who agree with us are smart. That is an indirect form of reinforcement and self-aggrandizement that can be dangerous. It is a cousin of Mark Twain’s warning that it is what you know that ain’t true that is most damaging. At the risk of committing this error, I recommend an article by Captain Hook who expresses sentiments in line with my own. Here are some excerpts which are perilously close to what I have expressed:
We are getting close to the day of reckoning this fiat currency economy suicide mission the Fed(s) has engineered for us. So you better get ready, because they will not ring a bell at the top of the stock market to warn the party is over
… the end of the line in QE debt monetization related economic growth is almost here with diminishing returns in money printing and central bank balance sheet growth re-accelerating. And while its true central authorities can still increase QE to offset diminishing returns, and in fact have stated they intend to do just that in Europe and Japan early next year … the effects of all this money printing will be negligible. And before its all over dont be surprised to see QE in the States moving from $1 Trillion per year (where we are now) to $1 Trillion per month, and to infinity essentially. [ I think a collapse will occur before they get close to Captain Hook’s monthly projection.]
… it will never stop until the system blows-up…
Add to this picture a new and naive Fed chair, with visions of sugar cookies in her head, and one does need wonder how US Treasury yields remain sanguine in coming years. Because once confidence is lost a negative spiral can grip macro-conditions quickly given the hollow nature of the much talked about economic recovery…
… its not just the bubble in Treasuries one should be worried about, which up until this point has been no trouble at all with the QE backstop. There are also stocks and real estate to worry about as well, where you know a problem exists when the speculators are speculating on the degree of speculation. Because theres no free lunch despite what lying bureaucrats would like you to believe, given
… this lunacy can obviously continue for longer than anybody with a whisper of common sense could conceive. The sad part of this entire mess is the crazier it gets, the more anxiety is created, the more people will hold back, the more the Fed will have to print money, the more stocks will go up until we reach the point of heart attack for the over-drugged junkie. Then, the bond market is going to blow up, and its all over.
We are caught in a liquidity trap that demands the Fed monetize some 70% of all net bond supply; meaning rates would be considerably higher if they were not doing so. So, dont fall for any of the BS taper talk. This is just Kabuki Theater for fools because key debt markets are becoming increasingly stressed.
… the Fed(s) have no choice but to keep accelerating the craziness, which will become a problem for the bond market once rigging efforts on the part of the bureaucracys price managers begin to fail noticeably. You will know this is the case when they cant keep credit markets supported anymore, which will tip diminishing returns into freefall. (i.e. and in turn re-accelerate the need for more money printing as things spiral out of control.)
… dont be fooled by taper talk, which has the effect of catching offside short sellers when weak data points come out, causing a short squeeze. (i.e. thats what happened last week post the Fed minutes release.) What market participants dont realize yet is such talk is just expectation management on the part of the Fed so that people are not surprised when it happens…
Who needs gold when the traditional stock market is going up right especially when Da Boyz are making copious amounts of fiat currency underwriting the tech fads of the day. And with stocks still under-owned on some measures, QE set to spread to Europe (and increase in Japan), and the average hedge fund managerstruggling to play catch up, which means stocks are likely going much higher, gold could remain in the doghouse for some time yet, well into next year.
Gold will of course be the place to be in the end, when all the Ponzi finance has collapsed… Better buy some gold so you can eat when inflation goes through the roof bailing out this ship of fools.
I disagree somewhat on the margins with a few of the comments presented above, but this disagreement is minor and could be seen as nitpicking. In general, the statements presented are very much in line with my thinking.
As always, the critical question is how long the economic fraud can continue.
- Detroitification — It’s The Government, Stupid
- Momentum-Volatility System — Philosophy and Results
- The Interest Rate Canary
- Another Step Closer To Economic Armageddon
- Economic Prosperity Ahead or A Train A Comin’
- Billy Jack: Metaphor For The Economy
- Obama Doesn’t Belong At Gettysburg
- Not On My Watch
Talking Real Money: World Monetary Reform
By Michael O’Brien
Today’s AM fix was USD 1,283.25, EUR 955.23 and GBP 801.53 per ounce.
Yesterday’s AM fix was USD 1,276.00, EUR 951.25 and GBP 798.75 per ounce.
Gold rose $4.40 or 0.35% yesterday, closing at $1,273.30/oz. Silver slipped $0.19 or 0.92% closing at $20.56. Platinum fell $5.55 or 0.4% to $1,424.20/oz, while palladium fell $9.50 or 1.3% to $727.97/oz.
Gold inched up again after Federal Reserve Chairman nominee Janet Yellen said the U.S. economy and labor market must improve before QE is reduced. This lifted confidence as silver prices recovered from their lowest levels since August. “The focus for the bullion market may shift to the upcoming testimony by Yellen,” James Steel, an analyst at HSBC, commented. “Chinese gold demand remains brisk. However, gold is likely to remain on the defensive in the near term”, wrote Steel.
The latest long term gold trend research from Nick Laird at ShareLynx indicates that the price of gold may rise in the near future. In the chart below, Nick references those periods from the past when it was prudent to buy and to sell. He also indicates that this particular period, November 2013, may be a prudent time to to buy. This chart reaffirms GoldCore’s long term outlook for the price of gold.
Long Term Gold Trend (www.sharelynx.com)
“Sometimes it’s not enough to know what things mean, sometimes you have to know what things don’t mean.” Bob Dylan
The Bank of England says the UK recovery has taken hold and Chancellor George Osborne is reported as saying “the report was proof the government’s economic plan was working.” The governor of the Bank of England, Mark Carney, said the bank will not ‘consider’ raising interest rates until the jobless figure falls below 7%.
However, The Bank of England threw a get-out-of-jail card on the table and said that there was a two-in-five chance of the unemployment rate reaching the 7% threshold by the end of 2014. And then added that the corresponding figures for the end of 2015 and 2016 are around three in five and two in three respectively. What exactly does the Bank of England mean or what does this not mean?
The financial crisis of 2007-2008 has sparked the most intense interest in international monetary reform since Richard Nixon closed the gold window at the New York Fed and devalued the U.S. dollar in 1971. Nixon’s action was widely seen at the time as presaging the end of the dollar-based world trade and financial system. On the face of it, this probably wasn’t an unreasonable expectation at the time. Within fewer than ten years, however, it was proven to be far off the mark. The dollar fell alright, but by the middle 1980s had recovered strongly.
In retrospect it is clear why the dollar sceptics were wrong. To begin with, the U.S. economy was still the world’s largest and the U.S. was still the leader of the “free world,” that is to say the world outside the communist bloc. The NATO countries of Western Europe were wholly dependent on the U.S. for security as well as for markets.
The same applied to Japan, South Korea and Taiwan, while the signatories of the secret UK/USA intelligence agreement (the U.S., UK, Canada, Australia and New Zealand) represented the Anglo core of the old British Empire, a group with no interest in seeing the dollar replaced. Communist Russia and China were in no position to register an opinion, much less offer an alternative. By default, the dollar soldiered on, thanks to the geopolitical realities of the time.
But what about today’s realities? Continue this fascinating story in our November edition of Insight – Talking real money: World Monetary Reform.
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In this exclusive interview with Birch Gold Group, former Congressman Ron Paul shares his opinions on a number of topics, including investing in physical gold and silver, the future of the U.S. dollar and the role of the Federal Reserve. Read the full transcript below, or listen to the recorded version located below Congressman Paul’s photo
Rachel Mills for Birch Gold Group (BGG): This is Rachel Mills for Birch Gold Group. I am speaking with Ron Paul today. How are you, Ron Paul?
Ron Paul (RP): I am doing very well. Nice to talk to you Rachel.
BGG: It’s good to talk to you again, and by the way of information for Birch’s audience, I was your last press secretary on Capitol Hill in Congress and I worked for you for the 5 years. So I may be cheating a little bit because a lot of your answers to my questions I maybe have a pretty good guess at what you might say.
BGG: But, just really quick – today with you I’d like to go over several things. But I’d like to ask your opinion on things like Janet Yellen as the next Fed Chair, about debt ceiling and shutdown issues. I want to get into, briefly, if you are still a buyer of gold even though it is so “expensive”. But first I wanted to introduce Birch Gold’s listeners to your background a little bit because I think it’s fascinating. In 1971, Nixon closed the gold window which led to the end of the Bretton Woods agreement. That was very important event for you, I know for sure, because you knew at the time that it would eventually destroy the currency, which we are still experiencing. And you said that that was what got you into politics to begin with. Had you been reading Austrian economists before that?
RP: Yes, for a good while. As a matter of fact, it was 1971, there was confirmation of the Austrian economic writers who had been predicting that would happen as early as Henry Hazlitt said when the IMF was set up in 1945. He said it wouldn’t work and Bretton Woods would break down. And by the 50′s and the 60′s people were rejecting it and it was so artificial and it was fragile. So people did know that it was coming, and mainly it was coming because the governments pretended that the dollar would be as good as gold at $35 an ounce forever, yet they kept printing dollars and it was pretty simple logic to figure out there’ll be a limit. The governments worked real hard to convince the people that there was no problem, that the dollar would always be valued at $35 an ounce.
But finally the market overwhelmed. The politicians and Congresses, and Central Banks can manipulate things for a while but eventually if they are out of sync with the market, the market will overwhelm. And even if the government won’t permit it legally to do it, it just drives the whole system into the underground economy. So fixed exchange rates and different things don’t work, they just hide the fact. But in 1971, it was confirmation that everything that the Austrians were saying as far back as the beginning of the Bretton Woods, that was true. And of course we’ve been suffering the consequences from that ever since.
BGG: Yeah and I’ve heard people argue that the dollar is doing well against other currencies. But I know for Austrians and for people who understand gold, like you and me, that’s not much solace because it’s all on a race to the bottom.
RP: Right and the ultimate measure of the value of the currency is what it purchases, so gold is a good indicator long term, I don’t think it’s a good indicator short term, because there are a lot of factors, just like in the 50′s and 60′s, they were able to hold gold at $35 an ounce when it should have been $235 an ounce! But anyway, overall in the long term it’s what the dollar will purchase. And even though our government tells us today there is no inflation, they are trying to get prices to rise at at least 2% a year, yet there are some things in our economy, the prices are soaring: the price of a bond, the price of education, the price of medical care – all of these things are going up.
So there is a lot of price inflation, but that’s the ultimate tests. You can measure one currency against another, gold is a long-term indicator. But if none of the prices were affected by printing money, it would be no big deal. But they are and of course the major problem is not only the price increases, it’s the malinvestment, the overinvestment, the bubbles that form and the corrections that have to come. That’s where the real problem is, in addition to the cost of living going up and hurting the poor and the middle class, much more so than it will the wealthy.
BGG: Right, which leads nicely to Janet Yellen as the next Fed Chair, as recently has been announced. What do you think of Janet Yellen? Do you think she’s going to solve all our problems?
RP: No, she’ll make them worse. She’s inherited a mess, although she was a participant in the mess and she always argued for more inflation. One thing I find a little bit interesting is that she has a reputation for transparency. She wants to tell the markets exactly what their decisions are early on and let the markets know what they are doing. But if it comes true transparency, like allowing an audit of the Federal Reserve, and letting us know who they bail out and when they bail out and what they did in ’09 with their trillions of dollars, and all the international transactions, there’s no way that’s going to be permissible. Because that’s where all the power and control is accomplished, it’s behind the scenes with the Fed on international transactions.
But if anything, she takes a position, not only did she endorse what Bernanke was doing, she was always much more dovish on trying to prevent prices from going up and having, you know, price inflation. She was arguing the case for even more, so the odds of her having the guts or the wisdom to start backing off the purchase of debt, it’s slim to none. So that will certainly continue and it’s still working on the surface. The longer it lasts, the worse the correction will be when eventually people give up on our dollar and give up on our debt.
BGG: So do you think Larry Summers would have been any better? He was rumored to be Obama’s preferred choice. What do you think?
RP: No, the policies wouldn’t be all that different, even if he had been slightly more reserved in credit creation. He was also a person that would… there is a subjective factor in markets too – and he would have added as another subjective factor because people didn’t like him. And he might be just, you know, annoying the marketplaces because that is a factor, they might trust him less. But overall they’re very much the same – both of them. Anybody who can even be considered to be Chairman of the Federal Reserve will be an endorser of Keynesian economics, that the lender of last resort is crucial for the banks and all the currencies and Central Banks of the world.
And they believe, though of course, the most important role for the Fed – and Congress never talks about it, but they secretly acknowledge it – without the Fed, who would buy the debt? And if somebody didn’t buy the debt, interest rates would soar. So even this big talk about all the arguments in Washington on the issues of war and spending and welfare and debt, they’re in total agreement with each other, and they all support the Fed’s role in being not only the lender but the printer of the last resort. Print what you need… but just common sense tells you that this can’t last.
BGG: Who would’ve you picked?
RP: I would’ve picked nobody. I don’t think we should have a Fed, so I wouldn’t pick a Chairman. But even though in the Presidential campaign when they pushed me – “well, you’ll have to pick someone to unwind it” or something like that – I always threw out Jim Grant’s name. Because I’ve known him, he’s an Austrian economist, he knows that monetizing the debt is bad and if they were trying to work on a transition, somebody like that, you know, would move us in the right direction. But he wouldn’t last either because if he decided right now to only buy $75 billion worth of government debt per month, the markets would crash probably and then they would want to throw him out. So it’s a system that is very friable and unworkable and since they will not work out of it gracefully and deliberately, you know, we will probably go on to having amajor crash of the dollar – that’s what I see happening.
BGG: Yeah, scary. Moving on, I wanted to ask you about the debt ceiling. We are up against the debt ceiling again, as we always find ourselves every few months it seems. And so, we’ve had an impending crisis if they don’t raise the debt ceiling, which everyone expects they will find a way to raise it. But then, before you know it, we will be right up against it again. So what is the point of the debt ceiling anymore?
RP: Well, it was intended to restrain government but some people don’t even like it, they want to get rid of it, just so the government never has to be hesitant in spending as much as they want. But you’re right: Once they raise it, they just go back to doing the same thing. The debt ceiling isn’t as necessary – this October 17th day isn’t as crucial as they pretend, because that’s an arbitrary date. They could have picked the 16th or the 20th or any date they wanted.
Besides, the national debt hasn’t moved since May because they’re always taking money elsewhere and spending it and paying all the bills. So they can continue to do that for a week or a month or a year if they really wanted to. Just pay the bills as the money comes in and they could always pay the interest rates. And the other thing… if, say, we were in charge and we wanted to change things to work our way out of it and we wanted to deal with this national debt, just eliminate the debt we owe to the Federal Reserve. We pay a lot of interest to the Federal Reserve and they turn this money and they use this money for all kinds of things, so I would just wipe that debt off the books. But if we did that today, that means they would have a lot of room for more debt – that would lower the national debt by $2 trillion.
BGG: Yeah but it wouldn’t solve the spending problems…
RP: This government would spend more money if we got this freebie! But I would only think that would be worthwhile thinking about it is, you know, to tide this over and work our way out of it. But when the reforms are necessary when a crash comes and if we have to pay off the debt, you don’t have to pay the debt to the Federal Reserve if you are going to eliminate it or restore confidence and quit printing and quit monetizing debt – you could eliminate that. There is no moral obligation, there is really no legal obligation either because the institution isn’t even constitutional, you know…
BGG: …institution to begin with, yeah. It seems like debt ceiling, the only purpose anymore is just to create an artificial crisis which Washington seems to thrive on.
RP: Yeah they do and then they argue which authoritarian is going to run they show. And they don’t argue over the issue, it’s just the matter of which one, and then they are always talking about compromise, but they’re never talking about compromise between two authoritarians who want to manage the economy in different ways. They always want those who believe in limited government, the Constitution and freedom to give up so much of it, and then they call it, you know, a “good” thing to sacrifice liberty for the benefit of the authoritarians. But the authoritarians are in charge and I don’t think that people who don’t believe in that system should yield anything.
I think that we all should stick to our guns and say that the rule of law is important, our privacy is important, our First Amendment is important, the way we go to war is important, and never give in. But right now these battles that we have when it comes down to shutting down government as a political stunt or the debt limit, it’s another stunt for the two variations of compulsion, you know, by government. They’re fighting over who has the power. And I think the American people are sick and tired of it, and rightfully so, but I don’t think they fully understand that it’s actually where the divisions are. They keep thinking that, you know, if those of us who believed in limited government would just give in and say, “Okay, go ahead and increase the national debt instead of by $1 trillion, increase it by $500 billion and worry about it next week”, and that’s supposed to be a good type of compromise. It solves nothing and makes our problems worse.
BGG: Yeah, and that’s why I appreciate Birch Gold trying to educate people and win on that front, I know it’s important to you. But I wanted to ask you: Are you still a buyer of gold? It has gotten so “expensive”, some people even say there is a gold bubble. Is it possible for gold to be in a bubble?
RP: Well, it can get out of whack, people can buy… right now, of course gold is in a bit of a correction. So it’s different than a bubble that occurs when the interest rates are very low in the dollar system and then people overdo things and they overbuy. But markets aren’t always smooth, and the gold market isn’t smooth, so it goes up, it might go up too much, and at times too fast and then it makes a correction because the traders are in there and they have all kinds of motivation. If people look at it long-term, you know, from when the Fed started when it was $20 an ounce up to the time it went up $1,900 an ounce, you know, that’s more of the trend. Of course now it’s down. Instead of people arguing that it’s too “expensive”, I would think people who are in it for the long term, it looks to me like this would be a very good time to buy.
BGG: I would think so.
RP: So some people might say, “Oh well no, it’s too expensive, because it used to be $1,000 or $500 and I’ll wait for that.” No, I think this is a good time. I personally don’t get too much involved because I bought my insurance a few years ago at a different price. I look at gold as insurance and others will, you know, others might be just at a time where they can start buying their insurance against the dollar fiasco, and I would say this is as good time as any.
BGG: Yeah, I have a family member, I won’t get too specific who, but a family member who is inquiring about gold. It’s interesting to me because this person is not someone who is typically into economics and the things that I talk about. But now she’s looking around and getting a little bit nervous and thinking that gold might be a good investment, but wondering if it’s too late to jump in. So…
RP: Certainly if they thought it was too late that means that they must trust the government to balance the budget, and trust the Fed not to print any more money and that you’ll never see prices going up. And most people don’t buy into the government’s argument that the cost of living isn’t going up. People on fixed incomes… and this is one thing that conservatives and libertarians don’t give much credibility to, because we don’t like the setting of wages, you know, and pushing up minimum wages with the law… but the truth is, the cost of living has gone up much faster than the minimum wage.
But that’s characteristic: Cost of living goes up much faster than Social Security benefits. But the fault there is the currency, not the fault of laws not matching up with the system and compelling businesspeople to pay a certain amount. But no, I think the cost of living – which isn’t inflation in the ordinary sense – is very, very serious and that’s why people are saying, “I need more money, send me more money on my Social Security check” or “Send me more money by another law, the minimum wage law.” And this misses the point because it really is the nature of money and deficits and what the Fed does.
BGG: Right. Well, how is retirement treating you? Are you retired?
RP: Not really. I’m retired from Congress and that is good. Not that I didn’t enjoy working there with my staff but…
BGG: You have to say that!
RP: I’m just glad I’m not going back and forth on airplanes, on John Boehner’s schedule. But I have a lot of activities going on: I’m working hard on homeschooling, I have a curriculum on homeschooling, which I like, and the Internet programming, I do some radio broadcasting and write a book now and then, so I’m very happy with my schedule.
BGG: Yeah, I’ve looked into your homeschooling curriculum and I’m a subscriber to the Ron Paul Channel, so it’s all very exciting.
RP: Wonderful. Hey, RonPaulChannel.com.
BGG: Good! Well thank you so much for joining me today. I really enjoy talking to you. Again, my old boss, Congressman Ron Paul. Thank you so much.
RP: Thank you Rachel.
Time is nearly up for Ben Bernanke, the chairman of the Federal Reserve who supposedly applied his scholarly knowledge of the Great Depression to steer the U.S. to safety after the financial crisis.
In truth, Bernanke navigated a monetarist course that favored intensive intervention, following in the footsteps of many mainstream economists who grossly misunderstood the lessons of the Crash of 1929 and the ensuing malaise.
That lesson is that when corrective crashes occur, intervention is far from the cure — it is the cause.
Until we learn from the past, we will continue to expose ourselves to devastating booms and busts. The Bernanke-led Fed has only exacerbated the problem, leading us to the brink of an even worse correction.
To capture the lessons learned, we turn to a scholar of the Great Depression: Murray Rothbard of the Austrian School of Economics, who refutes the common misconception that “laissez-faire capitalism was to blame.”
His contrarian and far less popular — yet more accurate — view is that the booms and busts of the business cycle result from shocks to the system caused by monetary intervention….
- What the Austrian Business Cycle Theory Can and Cannot Explain (coordinationproblem.org)
- NEWSMAKER-Thrust into crisis, Bernanke tested bounds of Fed policy (uk.reuters.com)
- “The Austrian Analysis of the Great Depression and the Recent Recession are Wrong” (economistsview.typepad.com)
- The right’s antics could cause a Depression: The terrifying default aftermath (salon.com)
- Friedman, Hayek, and Keynes. (ritascosta.wordpress.com)
- FLASHBACK: ‘Politicians caused the Great Depression’ (marketsanity.com)
- How We Can Predict The Next Financial Crisis (popalx.wordpress.com)
- Financial Crisis and War (project-syndicate.org)
- Goldman’s Blankfein: The Worst Case Scenario ‘Absolutely Will Happen’ (businessinsider.com)
- HSH Nordbank’s Dr. No CEO Faces Trial Over Financial Crisis – Bloomberg (bloomberg.com)
- Rogoff: Innovation Crisis or Financial Crisis? (economistsview.typepad.com)
- Volcker: Fed will ‘fall short’ (money.cnn.com)
- Volcker Cautions Federal Reserve May ‘Fall Short’ – Bloomberg (bloomberg.com)
- Volcker warns on limits of U.S. easy money (theglobeandmail.com)
- Volcker Sets Up Center to Examine Trust in Government – Bloomberg (bloomberg.com)
- Volcker: Fed should focus on containing inflation (usatoday.com)
- Eric: Volcker: Government Makes Up 35% Of GDP, Mortgage Markets Are Now A State ‘Subsidiary’ – Forbes (forbes.com)
- Former Fed Chairman Volcker Wants to Rebuild Public’s Faith in Government (wnyc.org)
Elizabeth Warren Confronts Eric Holder, Ben Bernanke And Mary Jo White On Too-Big-To-Jail | Zero Hedge
- Sen. Warren Continues Campaign Against ‘Too Big To Jail’ Banks (commondreams.org)
- Sen. Warren: Regulators should take big banks to court more often (bizjournals.com)
- Elizabeth Warren Pushes Feds For Answer On Big Bank Enforcement (syndicatednewsservices.com)
- Senator Warren Wants Banks to Admit Guilt (readersupportednews.org)
- Elizabeth Warren Demands Answers, Republican Hypocrisy Called Out, and More (truthdig.com)
- Sen. Warren Asks Fed, DOJ & SEC for Analysis on Settling without Admission of Guilt (lawprofessors.typepad.com)