Monday, March 12, 2012
|Friday, 09 March 2012 00:00|
We can make a great argument that platinum is a great investment with soaring industrial demand. We can argue that gold is a great investment with soaring monetary demand. However, silver is the only metal in the world where both arguments can be made, silver is an industrial metal, jewelery, and a monetary safe haven just like gold.
What most people don’t know is that right now there is less above ground available silver than there is gold, that’s right, there is less silver than gold. This trend of consuming silver and saving in gold isn’t going to stop, the above ground supply for gold will continue to grow, while the above ground supply for silver will continue to move us towards a physical silver shortage.
Silver is without at doubt the most important metal in the world, yet most people when they think about the uses for silver, think of jewelry, silverware, and photography. However, this barely scratches the surface for the uses for silver, in fact, we could write an entire book on just the different applications silver is involved in.
Below are some of the uses for silver that will help continue to grow demand for physical silver. FutureMoneyTrends.com wants everyone to understand that silver is all around you, whether you are talking on the phone, driving in your car, or looking for something to eat in your refrigerator, silver is in more products than you can imagine.
Silver Antibacterial Bandages
Silver has germicidal effects that kill many lower organisms. The colloidal or ionic silver is a silver solution that is an antibacterial product now sold on special band aids. For years, burn wards have soaked bandages in low concentrations of silver solution in order to prevent infection. Silver has been used to preserve and help save the skin of burn victims. Silver also promotes the production of cells, helping to heal wounds faster.
Not what you are thinking, so please don’t start taking apart your old washing machine looking for silver. The silver we are talking about is in the new Samsung washing machines that inject silver ions into the rinse cycle in order to kill 99.9% of bacteria that causes odors. By using about 1 ounce of silver, these Samsung washing machines can sanitize over 3,000 loads, this means no hot water or bleach necessary, just a dash of silver.
Silver based food packaging liners that preserve food quality made by Agion. Using an active ingredient of silver zeolite, which is a delivery system that dispenses silver metal ions in a controlled release over time, the silver is able to disrupt microbe growth by interrupting ribonucleic acid that is needed for an organism to reproduce.
According to David Eaton, secretary of The Institute of Water Ionization Technologies in the UK, silver based water purification systems offer the most reliable and cost effective alternative to chlorine. In fact, both Russian scientists and NASA concluded that the best method for long term water purification was using silver as the purifying agent. Silver kills bacteria in the water and is able to help maintain the purity over a long period of time.
Have you ever wanted to store water? Put a few drips of colloidal silver and kill over 650 known bacteria that can grow in your stored water. On cruise ships and airplanes, they often make sure there is some silver in their water tanks for this very reason.
Silver was even used in the 1980’s in the United Kingdom to help stop the spread of Legionnaire’s disease, a disease named after Legionella pneumophilia, an aquatic organism.
Since silver will not ignite, if you want to avoid a spark turning into an explosion, then you need to use silver. When it comes to hospitals handling pure oxygen at high pressure in liquid form, in order to avoid it becoming dangerous, the equipment used to transport the oxygen is made at least in part with silver.
In 2008, Mitsui Mining and Smelting Co Ltd announced that it had developed a new catalyst for diesel engine cars. This new auto-catalyst replaces the use of platinum with silver, platinum as we write this is about 48 times more expensive than silver, so you can see that this will be a lasting change and new use for silver. At the time of the announcement, a spokesperson for Mitsui stated that “silver will totally replace platinum in this new auto-catalyst that we’ve developed.”
There is about 80 cents worth of silver in the average cell phone. In fact, the metal contents in cell phones is very precious, having all 4 precious metals in them, platinum, palladium, gold, and silver.
Approximately 1 ounce of silver is in each solar panel you see on residential roofs. Without a doubt one of the fastest growing industrial uses for silver is photovoltaic cells in solar panels, in 1999 the amount of silver used in this industry was so small there isn’t even an official reporting of the number. However, 10 years later that number hit 18 million ounces, and last year for 2011, 70 million ounces were used. David Morgan, editor of The Morgan Report who runs the website www.Silver-Investor.com feels that solar demand could reach 130 million ounces per year around 2014. In fact, Jessica Cross, CEO of the VM Group believes that “solar panels will probably be one of the leading industrial uses” for silver. Silver is crucial in photovoltaic technology, silver helps collect electrons for the electrical current and transports them out of the module for power use.
Silver is used in the windows of skyscrapers in order to reflect away over 90% of the heat from sunlight. Silver, more than any other metal is the best reflector of light which is one of the reasons it is used in mirrors.
Radio Frequency Identification Technology (RFID) Chips
This industry will one day replace bar codes, already being used at the largest retailer in the world, Wal-Mart. RFID tags have a very thin silver foil that is used as a high-performance receiver. This technology is basically a tag with a mini-antenna that saves data and is able to emit a radio wave in order to send information to a central processor. Basically, retailers and manufactures who want to know more about their products and have a more efficient flow of goods after leaving their possession, can now have these RFID tags placed on their products. For example, U.S. department of State uses RFID chips in all new American passports. Now the passports can be scanned by the authorities, who will see your personal information that should match the same information on paper.
RFID chips have been controversial for civil rights groups, however, ignoring that side of the RFID chip and just focusing on the silver content, you can see that these are becoming very popular and will add to the growing silver demand. We should note that the amount of silver in RFID chips is so small that once used to make one, the silver is literally gone, it will not be recycled or used for any other purpose.
Silver compounds have a toxic effect on some bacteria, algae, fungi, and even some viruses. The use for silver goes back to the very beginning, the father of medicine, Hippocrates wrote that silver had beneficial healing and anti disease properties. Silver was also used to prevent infection during war time before antibiotics were used.
Silver oxide-zinc is used in batteries for digital cameras, watches, and phones. Recently it was announced that all Apple products will be using silver oxide-zinc batteries.
The use of silver in electronics is widespread and is used in almost all electronics you have in your home, from your television to your computer. Circuit breakers, switches, and fuses all use electrical components using silver. The odds are if something has a ‘power on’ button, then it has some silver in it.
Silver bearings in engines have become essential components in Jet engines. Steel ball bearings that are electroplated with silver become the strongest type of bearing in the industry. As noted before, silver is able to withstand high temperatures which makes it perfect for the bearings in jet engines. According to the silver institute, even in the event of an oil pump failure, silver-plated bearings provide enough lubrication to allow a safe engine shutdown.
Throughout your vehicle you have electronics, from opening your windows to adjusting your seats. Your engine has silver and even your antifreeze has ethylene oxide, a compound made from silver.
The Uses For Silver List
The list for silver uses can go on and on and on. Silver is also used in lasers, satellites, robotics, high-tech weaponry, TV’s, refrigerators, wall switches, photography, glasses, brazing, soldering, cloud seeding, wood preservation, musical instruments, automotive industry, explosives, dental filings, methanol production, nuclear reactors, Xray machines, polyester, deodorant, disinfectants, catheters, and thousands of other applications.
One of the largest uses for silver is in industries like the production of plastics, where silver is used as a catalyst. Approximately 150 million ounces of silver was used last year in order to produce ethylene oxide and formaldehyde, both used to make plastics. Formaldehyde is the chemical that is the building block for plastic, so in order to produce plastic, you need silver.
So once again, the products of silver are all around you, even if they don’t have silver in them, that plastic cup you are drinking out of and the remote control in your hand, both needed silver in order to be created.
Silver Is All Around You
Where ever you are right now, take a look around you and think about how much silver products are in front of you. For me, I’m writing on an Apple Computer, my cell phone is on my desk, and a blue plastic cup is right next to my hand that has a silver wedding band on my ring finger. When I look around the room, I notice that I have a light switch, electrical outlets, and a television. In my desk, I have plastic pens, ink, and a small flashlight. Looking out my office window, I can see my car, in it a rear view mirror, side mirrors, rear window defroster, and of course under the hood is even more silver. All these products have silver in them, or needed silver in order to be created.
Now here is the fun part for silver investors, look at a map of the earth at night. Notice the intense light that comes from the U.S., Europe, and Japan. We want you to picture what the amount of silver it takes to produce this amount of light, think about all the other electronics these first world regions have surrounding those lights. As we just described, think about all the silver in bedrooms, vehicles, and on each person. Now look at China and India, with combined populations of 2.5 billion people. This doesn’t include the South American or other Asian countries, just these two specific countries. They are going to need skyscrapers, houses, condos, apartments, vehicles, cell phones, water sanitation facilities, and hundreds of thousands of electronics... including plenty of iPhones and iPads. Bullish for Apple, yes, bullish for silver, even more.
Silver has so many uses and so many customers, it is very easy to see that if the buyers of silver ever thought there was going to be a shortage, the price could have a historic run. We are not talking about individuals, we are talking about the Apples of the world, who in the future may come into the silver market in order to protect their own businesses from delays caused by a silver shortage.
Most of these new uses for silver are from the 20th century. Prior to this, silver had a very limited role for industrial uses, silver was mainly used for money, jewelery, and in the 19th century photography. Of the 46 billion ounces of silver ever mined in history, only about 1 billion remains above ground. A very large amount of the above ground available supply of silver was consumed in the past 60 years. FutureMoneyTrends.com believes what we saw in the 20th century is nothing compared to what we will see in the 21st century, with electronics and 7 billion people all desiring to live the lifestyle of the west, the above ground available supply should get completely consumed over the next 10 years.
Silver Vs. Other Metals
As you can see, the arguments made for silver can’t be made for any other metal. That is why when people suggest to us to diversify into physical platinum or palladium, we always suggest back to them to buy more physical silver. If you want to own a precious or industrial metal, silver is King. If you think the economy is going to collapse and we will all be living in a mad max world, then you definitely want to own some silver to barter with, silver after all is the most used monetary metal in world history. If you think the economy is going to boom and the 1990’s is just around the corner, then you want to own silver. Industrial demand will soar as the rest of the world becomes industrialized. The Chinese want cars, cell phones, and other electronics just like the west, which means the largest population in the world needs a lot more silver. The entire world will need a lot more silver, so the question is, can new mining keep up with demand?
We don't think so, though we are bullish on ALL metals, the fact is nothing will beat silver over the next 10 years.
The opportunity in owning silver and silver mining companies is epic.
By: Jim Willie CB, GoldenJackass.com
Scattered diverse and almost uniformly unfavorable and dangerous events are unfolding, as the global economy and financial structure undergoes the equivalent of endless earthquakes and bombardment of solar emissions. Reporting is difficult, since information is distorted toward the sunny side. Events are moving fast, as quickly as the danger level is rising. As conditions worsen, the hype and spin has risen almost out of control. The political machine, tied at the hip to the banking apparatus, has ramped up the growth story even as the strain on the information spin has become more visible and subject to heavy criticism. A re-election year is always fraught with risk of unmasked falsehoods making headlines. For some reason the Mayans have been lifted in prominence despite their cultural vanishing act. Like calling the dodo bird the epitome of future evolution in the aviary world of ornithology. The Jackass prefers the eagle, hawk, and falcon. Nonetheless, the list of acts on stage is replete with stories of collapse. A review is useful. Keep in mind that whatever happens to Greece will serve as vivid preview of what is to come in Italy, Spain, and perhaps France. Much more ruin comes. Witness the great unraveling. The only winners will be tangibles, like gold, silver, crude oil, and farmland.
GREEK TRAGEDY TURNS INTO CONGAME FARCE
Notice the debt solution to the debt problem handed to Greece, shoved down their throats. More specifically, observe the austerity budget requirements that assure economic deterioration. No exception has been offered, yet the same prescription is applied that results in job cuts, project termination, and greater deficits. Observe the bond swaps of new faulty bonds for old impaired ruined bonds. No solution there. Observe the strongarm methods of powerful coercion to enable the bond holders a cooperative role in the process. Observe the asset grabs and seizures tied to collateral in previous debt agreements. Observe the vacuum effect of money fleeing the Greek banking system. Observe the profound economic recession, far worse than reported. Observe the chaos in the streets, as the people are angry that decisions are made without their participation, acknowledgement, or approval. As the Greek debt default continues down the road, with delays and distortions to its view, the only assurance is the end point. The banks resist a liquidation or exit from the Euro currency, since it would spell sudden death failure for many large European banks. The nation must exit the Euro currency in order to write down its debt more effectively (rather than trade it), in order to be in a position to devalue it for a true stimulus, in order for a fresh start out from under the banker thumb. Let's watch the details of the Credit Default Swap, whether a default event is ordered. Be sure to know that the claimed $3.2 billion in net CDS payouts is a grand lie. If $200 billion is offset by $196.8 billion between Group A versus Group B (guessed hypothetical numbers), then know clearly that Group A is deader than dead, while Group B will never by paid by the dead counter-party. The CDS sham reveals mutually dead financial entities, not offsetting calculus.
PHYSICAL GOLD DRAINAGE BACKFIRE
Amazing what can be done when 22 million paper gold ounces is dropped on the market on a single day, the Leap Year Day of all days. Witness the leap downward in paper gold price and perceived market integrity. No need for an honest market. The CFTC remains asleep at the wheel, or with eyes firmly fixed on their master clubhouse on Wall Street, the chain tugged hard. The end result, as described by the notorious London Trader on King World News, is that a magnificent amount of physical gold is leaving the COMEX and LBMA. The United States remains transfixed on the paper gold price. The real action lies in the physical London gold market, where Asians are fast draining the London gold supply. Once again, a powerful dichotomy exists. The Boyz can control the paper gold price, but they are therefore gifting the Asian buyers with a hefty discount that results in truckloads of gold bullion rolling out the ramps in delivery. As desperation rises to ambush with naked gold sales devoid of metal, enabled by USGovt and UKGovt watchful eyes, the gold inventory is fast vanishing. The divergence will continue to play out, as the paper gold price might decline but the physical gold price will rise. The COMEX will become an irrelevant arena empty of inventory, even as London rots hollow. The gold price on the real physical honest side must continue upward, since supply is fast doing a vanishing act. It is going from West to East and will not return in our generation, along with true power. The recent episode of vast paper gold sales without benefit of collateral metal cannot keep the gold price down. It is recovering. The rally to $2000 was not permitted. The event has merely marked the road with a support level. Nothing can keep gold down, nothing. It is real money in an era when paper masquerading as money is being revealed for its faulty makeup, subject to acid drips.
$TRILLION USGOVT DEFICIT LOCKS 0% RATE
Few analyst seem to report a basic factor. The USGovt cannot afford a higher rate on borrowing costs than 0%, not now and not ever. So it will become permanent. This is the New Normal with ugly warts. There can be no Exit Strategy, since the government finances dictate no change. A normal borrowing cost would mean the debt finance cost would rival the defense budget in cost, and overshadow the Medicare cost. The USGovt deficit thus locks the 0% rate and puts the USFed in a monetary straitjacket. They refuse to discuss it, but instead wiggle around with feeble explanations of its continued policy. Notice the extension into 2014 of the accomodative 0% rate. What a farce! What a tragedy! What a pathetic excuse of a central bank! A vicious cycle is underway where the gargantuan federal deficits require continued 0% costs to finance them, but the 0% cost of money has its own heavy effect and damaging toll. The biggest insurance policy to the gold bull market is the USGovt and its runaway deficits.
DESTRUCTIVE DAMAGE OF 0% MONEY
The Jackass message has been steady and relentless. The 0% cost of money makes for a grotesque distortion in asset prices, all of them. Nothing is properly priced. The free money results in rising cost of everything rising. All categories rise inexorably within the cost structure. Wages do not, thanks to the forfeit of industry to Asia, in particular to China. So the squeeze on capital continues unabated and with ferocity. Capital is killed. By that is meant that marginal businesses and segments of business units within larger corporations will gradually respond to higher costs (equipment, materials, fuel, shipping) by closing the businesses. Workers are cut, but more importantly capital is retired, equipment is turned off, and capital is liquidated. A truck or machine or computer or telephone system might be sold off. The rising costs and more rigid final product prices dictate business shutdowns, since the profit margin is squeezed, then goes negative, forcing business decisions. The destructive effect on working capital from 0% money remains the singlemost blind spot of American and Western economists. They call it stimulative, when it is the exact opposite. They are badly educated. They are compromised by their paychecks. They are dead wrong, blind to the death of capital beneath their arrogant noses. Gold will benefit from the free money provisions, and head north of the $2000 price with ease. Gold will serve as capital sanctuary under attack.
HEAVY RELIANCE ON MONETARY INFLATION
As foreign creditors continue to shed USTreasury Bonds, the USGovt is left with a growing and near total dependence upon the US Federal Reserve to purchase its debt. It has no choice but to rely upon the inflation machinery apparatus to buy the USTBonds. Few bond dealers wish to continue, but their hope is not to be stuck with inventory, should the USFed stop buying. The dealers are acting as middlemen and nothing more. China continues to unload USTBonds, the latest month showing more of the same recent pattern. As Valery Giscard d'Estaing called it, the US benefits from the "Exhorbitant Privilege" of abusing the global reserve currency to finance its own debt in an unaccountable manner. Worse, the United States though the powerful forces of the Competing Currency War, has forced all major central banks to participate in the heretical 0% money policy. Nations that opt not to play the game will suffer from a rising currency exchange rate and damaged export industry. The major central banks are collusive in their policy, the effect being a Western world capital destruction slow burn. See the Global QE as it involves the US, Britain, Europe, and Japan not only in setting interest rates absurdly low, but in vast bond purchases wrapped in monetization schemes. Once upon a time 20 to 30 years ago, such schemes were called highly destructive and extremely unwise. Today they are normal tools. Gold will benefit from such powerful monetary inflation and debasement of money itself.
COLLAPSE OF SOVEREIGN DEBT FOUNDATION
The con game is impressive. They call debt money. The entire foundation of the current monetary system is a complex array of paper currencies backed by sovereign debt. The problem for its managers is that the sovereign debt is crumbling. The degradation process began in late 2009 when Greece showed its first visible wide cracks in the debt facade. The preliminary event was the Dubai debt breakdown; call it the fuse. So the financial press, banking leaders, and political marionettes insist on calling this chapter a global financial crisis. It is more like a global monetary system collapse, if truth be told. But in today's age the truth is a dangerous commodity, kept down in value by a cooperative subservient press, devoted fully to the syndicate and its dark motives. Holding like pillars the debt-based monetary system are the major banks. Their profound insolvency serves as proof positive of the broken structures of the monetary system itself. This is so plain to see. A mere FASB paper mache glued onto a rotten pillar does not permit it to bear weight. The legitimate matter behind the pillars is surely being siphoned as mass to other locations, while the farce of patch solutions continues with each passing month. The inescapable fact is that the world requires a new monetary system. To put it into place requires the liquidation of the old banks and sovereign bonds, which would mean making paupers and vassals out of the elite masters. So the game goes on.
USECONOMY MORIBUND WITHOUT INCOME
The concept of a jobless recovery is a bad joke. Such a concept does not appear in economics textbooks or its legitimate lexicon. The expectation of recovery without vast income machinery is a fantasy. The decision to ship US industry to Asia in the 1980 decade saw a climax in the 2000 decade with the advent of China. In doing so, the USEconomy lost its legitimate income sources and turned to inflating assets to power the national economy. It was the singlemost destructive trend in modern United States history on a financial basis. Income was replaced by debt, and the rest is history, where economists should be forced to inscribe the epitaphs. Stimulus programs at the USGovt level are mere plugs for state deficits. Infrastructure projects turn out to be funnels for Chinese contracts. As Kurt Richebacher told me in August 2003, as best recalled, "A nation that lacks industry is doomed, as it must at least dominate in transportation and steel, but the United States does not anymore." The financial press and banking leaders curiously serve up endless nonsense in viewpoints, that the US consumer is the engine. It is not. The engine is industry, and the USEconomy sorely lacks it. Unless and until the USEconomy brings back industry, factories, and all the supply chain encoutrements, the nation will remain moribund and without adequate income. The latest data, the December trade gap, shows a record setting $52.5 billion monthly deficit. This is not an economy in recovery. The rising energy prices are yet another crippling factor. A loud echo can be heard in Japan, where the nation is shocked by the reality of steady trade deficits, never seen in recent history. The power structure is to be turned on its head.
HOUSING MARKET RUINED
As China took a giant bite out of the US industrial sector, the world gave acclaim. Cheap stuff appears a good thing until the reality of lost income hits. The lower costs forced the US housing & mortgage bubbles toward their heights. The dependence by the USEconomy upon the housing & mortgage sectors became acute. The broken asset bubbles of homes and linked bonds spelled ruin for the USEconomy. A vicious cycle has developed, that even ultra-low mortgage rates cannot solve. The banks are becoming prominent owners of vast home inventory. They cannot dump their inventory. The big Fannie Mae presence is very much in play, a sign of corruption dominating since the agency covers up the mortgage bond fraud that reaches into $trillions. Each year, clownish voices proclaim a turnaround in the important housing sector. Each year the home prices go lower, precisely as the Jackass has forecasted. Imagine a nation so stupid as to depend not on industry and factories for legitimate income in value added enterprise, but instead on rising prices of home and property assets. Incredible! The next shoe soon to drop is the commercial sector finally, which has been protected and carried along for over three years. The dumping process has already begun. More bank balance sheet damage is to come. Neither the housing market can be liquidated, nor the bank sector can be liquidated, tied at the hip. The economy that depends upon both is surely halfway to the morgue. The collapse in progress should result in a different power structure.
BIG BANK LIABILITY DEALS
The parade of legal deals to limit the vast bank liability is a travesty to watch. Any reasonable analysis puts the liability risk at $2 trillion or more. Yet the cap on managed risk will be set at a mere $25 billion in widespread alleged mortgage fraud abuse. Each deal that comes up has the final figure a mere fraction of the true fraud. That makes for a favorable bank outcome. It reminds one of the Wachovia money laundering deal struck in 2009, no guilt admitted, the case kicked under the rug. The big bank was caught with hundreds of $billions in laundered funds from the Mexican drug cartel. The ultimate fine turned out to be about 0.03 of one penny per dollar laundered. The cost of the mortgage fraud and bond fraud abuse will be similar, much less than 1% of the amount involved. The goal is not only to limit liability, but to move on to new structural arrangements that erase the past bond fraud. A new contract over-writes the old in a merger of contracts, technically speaking. What the big banks cannot shovel into the Fannie Mae outhouse under USGovt aegis, they will protect with ring fences built from court settlements that are vastly out of proportion to the crimes involved. Nothing new here.
GOLDMAN SACHS REVEALED
The GSax brand is being tarnished. To be sure, they remain a fixture in the USGovt finance ministry. Its diminutive leader Geithner makes absurd moronic pronouncements from time to time. A couple weeks ago, he claimed the crude oil price was rising from a strong USEconomy and its growth path. Nevermind the war drums over Iran. Nevermind the vast USFed monetary printing project. Nevermind the anti-US$ movement within the oil world. Geithner more recently proclaimed that more commonly seen Chinese Yuan bond issuance and loan grants would have a muted effect on the USDollar. He lives in a fantasy world indeed. In 2008, an important event occurred when a Russian fellow escaped with a proprietary GSax unix box complete with software, which enabled insider trading that peeked at the order flow. The FBI covered it up quickly and dutifully, in true Fascist Business Model fashion. But GSax has taken major blows. They have been caught concealing the Greek Govt debt condition, as it entered the Euro Monetary Union over ten years ago. Widespread investigations are ongoing within Europe, and the venerable firm cannot solicit protective help on the continent. Matt Taibbi would be pleased. The most recent case close to home involved Overstock.com, which was preyed upon by Goldman Sachs and Merrill Lynch, as the Wall Street firms engaged in naked shorting of its stock. But isn't Wall Street exempt from naked shorting statutes on the legal books? The court decision made the case known to the public, more details to come. A wise veteran once shared that to become a GSax vice president, one major fraud must reside on the professional resume, which was not prosecuted. He was not joking. It is a criminal enterprise. The Greek bond situation might still result in tremendous GSax loss if not censure. Let's see if the GSax preppy Monti remains in unelected office in Italy.
END OF EQUILIBRIUM MARKET FORCES
Even USFed members notice that financial markets are being rigged. The phenomenon is obvious to anyone with an above average financial IQ. To point a finger at regular 10am and 3pm stock market recoveries should include a mention of the Working Group for Financial Market. It never does in the media reports. The USEconomy is stuck in the worst and most destructive recession in modern history, yet PE ratios remain robust. The bond market is the toy of the USFed itself, propped by $trillions in purchases. The USFed purchases at least 75% to 80% of all USTreasury offerings. The Operation Twist has been stripped of its fig leafs. The Dollar Swap Facilities are mere QE programs with a beard. The fact that the bond market has few if any buyers should be the main story. Sadly, the USGovt requires a weak economy in order to create more bond demand. Another vicious cycle is at work. The market mavens tend to cheer for interventions, even though the integrity of the markets themselves is fast draining into the sewer pipes. The mavens cheer at USFed bond purchases for its liquidity infusion, without much awareness of the absence of legitimate money. The USFed has become the quasi banking system, ever since the subprime mortgage mess hit, ever since the commercial paper market dried up. Yet it is failing. The indirect consequence of 0% money is distorted asset prices and extreme distortion of financial markets, all of them. The stock market is intervened upon. The bond market is directly controlled. The currency market is managed by the Exchange Stabilization Fund, which never receives press attention. The crude oil market is a vast playground, like when the Strategic Petroleum Reserve is released, or when the Gulf of Mexico is shut down, or the Keystone Pipeline is rejected. The Brent versus West Texas oil price spread has gone to $18 again. The grain market is twisted by wrong US silo inventory data. No end in sight to muddy financial markets. The housing market is one of the most difficult to doctor, but even it has a vast hidden inventory held by banks.
TEETERING PETRO-DOLLAR STANDARD
The Iran sanctions have undercut the USDollar more than any other single item. The Petro-Dollar is at risk. Many times in my articles, a warning has been scribed that the Dollar Kill Switch is ready on the wall, fully constructed, awaiting word to flip the switch. Someday in the not too distant future, the Saudis will announce acceptance of non-US$ payments. They have already made the supporting decisions toward this highly important step, related to Persian Gulf security enforcement. The numerous bilateral oil trade deals with Iran have become an epidemic that infects the USDollar in its unilateral dominance for trade settlement. One big reason Saddam Hussein was removed was his decision to accept Euro payments for crude oil. Another was to steal his gold, just like what happened in Libya. Another was to abrogate oil contracts made between Iraq and Russia as well as between Iraq and China. So as the many bilateral deals are struck with Iran, the USDollar foundation in trade settlement is crumbling, in parallel to the sovereign debt crumbling (see PIGS debt), in parallel to the USTreasury Bonds crumbling (see foreign creditor departures). The bunker busters might drop, but the real damage is to the stable catbird seat for the USDollar itself in trade settlement. Such trade is conducted less and less in US$ terms. Asia and the Middle East are leading the movement away from the USDollar.
GLOBAL USDOLLAR REVOLT
The developing nations of the world are in revolt against the USDollar. They see no future in holding US$-based bonds in reserve. They see no future in accepting US$ payments for their raw commodities and finished products. The secondary central banks of the world are increasingly stocking up on gold bullion and less on USTBonds. Some are actively converting from paper reserves to gold assets, like China and Russia. Many other nations are following their important lead. A more recent development has the BRIC nations blocking the IMF. They are cooperating less in Brazil, Russia, India, and China. The concept of the Chinese Yuan is being pushed, like in compromise, which includes a greater voice of the East and a smaller voice of the West, in particular the United States. The gold price will continue to benefit as long as the global revolt continues against the USDollar.
BARTER SYSTEM COMING
The current system must be replaced. Watch for signs of a vast comprehensive barter system with wide participation. It will involve deals between nations at the highest levels. It will involve deals between corporations at the middle levels. It will involve deals with individuals at the lower retail levels. It will be more fair. It will relegate banks to utilities, a much more useful function. It will lock up deadbeat nations that attempt to take in valuable products in return for toilet paper that accumulates in a rancid pile subject to acidic decay. The new barter system must have a financial core in order to handle the short-term transactions and payments required. That core will be gold based. The United States will not be at the center of this new system. In fact, the US risks being shut out if it does begin soon to join the movement. Being an outsider nation looking in will result in high price inflation and more rampant shortages. Demand for gold will rise as the new system falls into place. The system has been endorsed and put into the implementation stage by Germany, Russia, China, and the Persian Gulf. The trigger for launching the barter system, so told to the Jackass by one of its participating architects and engineers, is the broad perception that the current system has collapsed. That day is nigh.
Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a Ph.D. in Statistics. His career has stretched over 22 years. He aspires to one day join the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at www.GoldenJackass.com
Gold traders are the most bullish in four months after investors accumulated more metal than ever and hedge funds raised bets on gains to a five-month high.
Sixteen of 23 analysts surveyed by Bloomberg expect prices to gain next week and one was neutral, the highest proportion since Nov. 11. Investors increased their holdings in exchange- traded products backed by bullion for seven consecutive weeks and now hold 2,407 metric tons valued at $131 billion, data compiled by Bloomberg show.
Demand for gold is strengthening as European leaders seek to contain the region’s debt crisis and governments from the U.S. to the U.K. keep interest rates at all-time lows to shore up growth. The Federal Reserve and Bank of England have bought debt and the European Central Bank offered unlimited three-year loans to the region’s lenders, actions that spurred some investors to buy gold as protection against inflation.