Flight to Gold, the Fiscal Crisis and Political Consequences

The rally in the dollar and the problems for other currencies prove what we have been saying and that is all currencies will continue to fall vs. gold. The impetus for the dollar rally originates as usual with the government and is added to by the disarray in the economies worldwide, particularly in Europe. One of the things central banks have never learned is that financial engineering only works for a short duration, after that the problem worsens. Even the world’s strongest currencies, the Swiss, Canadian, Aussie and Norwegian, are only holding their own versus gold. The reason why is almost all central banks have done the same thing and that is create money and credit recklessly at the behest of the US government. The US and British financial systems are insolvent. The euro is under severe pressure, because of problems in Greece, Spain, Ireland, Portugal and Italy, and every other central bank is jockeying for position via competitive devaluation. The public may not notice it but the situation is really chaotic. As you can see, the US is never allowed a level playing field, but that is part of what comes with being the international reserve currency. Banks in Britain, Europe and the US continue to take losses, sometimes-severe losses. There is no intermediation going on with the dollar. Its rally is founded on manipulation. We suspect in the future we will have an interesting phenomenon and that is a fall in the dollar, pound and the euro, as gold moves higher as the only viable alternative. The world is going to be shocked when the euro collapses. It won’t happen overnight. It will take a year or two, but it has a good chance of happening. The US dollar cannot and will not for some time to come be a safe haven for wealth. That is because the dollar and the US economy have been deliberately destroyed.

The flight into gold that we have seen has not been sparked by anticipation of inflation, but by a flight caused by a lack of confidence and trust in central banks. If other major governments have monetary problems they cannot be buyers of US Treasuries. They will have to be sellers of dollars. That will drive the dollar lower, further reduce the demand for US funding, force the Fed to further monetize and create more inflation. That in turn drive the dollar lower, but more importantly it will give gold a life of its own. We have found that this is something the public ad professionals refuse to accept. There is going to be a devaluation of the dollar no matter what people think, or want to think in their world of denial and fantasy. Other letter writers who disagree have recently attacked us. They can disagree and that is fine, but we might remind them that we are the ones who have been correct in our predictions 98% of the time, not them.

We believe the current dollar rally is unsustainable. If you remember we recommended a short on the dollar at 89.5 on the USDX. It fell to 74. We have just seen a two-week rally from 74 to 78 on very low volume. We had said the rally when it began at 74 could go to 78 to 80. Several more days of trading over the holidays could take it deep within that zone. This is just another rally conjured up by our government led by Goldman Sachs and JP Morgan Chase, which will be doomed to failure. The rally is aided by unsettled conditions in Dubai, Greece, Spain, etc., and the continued viability of the eurozone. In addition, the same groups of criminals have viciously attacked gold and silver in an attempt to take gold below $1,033 and silver below $17.00. That completes the circle of attack. The SEC and the CFTC simply look the other way aiding and abetting the criminals that run our government and markets from behind the scenes. 

It is not surprising that 320 members of the House passed legislation to audit the Fed to find out where trillions of dollars have gone and what the Fed and the Treasury have done to manipulate markets. Just how much monetization is really going on? Has the Fed been buying more than half the Treasuries issued via stealth activity and how long will this continue? Will the Treasury default and officially devalue? Of course they will, it is only a question of time. What will the Fed do with bonds issued by agencies and toxic waste CDOs, and what did they pay for all this garbage?  Have they been paying the banks, Wall Street and insurance companies 80% instead of 20% on the dollar, so that taxpayers can pay the bill and these entities, which are insolvent, can be kept functioning? Why is it we could forecast all these events and very few others could? It is because if they did they would be ostracized and they would lose their jobs. That is how systems like this always work. You cannot lay a normal yardstick to what we have seen and what will be an unprecedented future. When the dollar officially devalues in a year to a year and a half, the shock will shake America and the world to its very foundations. 

An audit and investigation of the Fed is on the way and the American public is not going to like what they find. All the failures and criminal activity of the past 96 years will become reality. This coming year will see the Fed forced to monetize massive amounts of government paper, all of which will lead to massive inflation. Inflation will move up very quickly. The groundwork began last May and over the past two months we saw official inflation rise to 1.2% and then 2.4% as real inflation moved up over 8% again. Will we see something similar to what happened in Argentina, Zimbabwe or in the Weimer Republic We do not know. What we do know is it is not going to be good. All the telltale signs are being ignored and for such duplicity a high price will be paid. That is why we predict official devaluation and default. History is explicit; monetization cannot go on forever. Over the last two years the Fed has purchased trillions in what is essentially worthless paper from banks, Wall Street and insurance companies.

 The rally in the dollar is transitory, because at the moment Europe’s problems seem greater than ours.

Americans are truly furious that Democrats are ramroding through legislation that is conjured up in secret, and that those who voted for it have never read. Health care legislation is far reaching, committing us to a socialized medical system and will prove to be massively expensive. Congress has a 22% approval rating because everyone knows they are on the take. What sanctimonious thieves. The Treasury and the Fed have injected $12.7 trillion into our financial system that we know about, and the taxpayer is on the hook for potential losses of $23.7 trillion. As you can see from Treasury yields, foreigners are starting to vote with their feet and are not buying our debt. As unemployment continues to rise with inflation, America will be ready for revolution. A default and devaluation would lay further groundwork. Taxes will increase along with debt exacerbating the situation. America is on an uncontrollable train headed for a wreck. Is it any wonder the US dollar is being abandoned and gold is being purchased worldwide in a flight to quality. 

You have to ask yourself how does a stock market trade within 500 points for three months, when trading volume has fallen? There have been material withdrawals from mutual funds and 73% of trades are of the black box front running variety. The answer is the trading after hours, which has been dominated by your government’s plunge protection team. They cannot continue that indefinitely. There is lots of bad news coming in 2010.

The November medium home price rose 3.8% to $217,400, the highest level since May reflecting the $8,000 tax credit and growing inflation. Year-on-year prices fell 1.9%. The number of new homes on the market fell 235,000, the lowest since April 1971. There are now 7.9-months’ worth of homes for sale, up from 7.2% in October. What has to be added to that is discouraged sellers who have taken their homes off the market, and lenders that have been withholding inventory for sale – a bottoming market is years away.

Loan demand fell 5% last month. Mortgage applications fell 10.7%, the lowest level in two months. Refi loans fell 10.1% and mortgages fell 11.6%.

This as foreclosures topped one million. As a result home construction has fallen 83% from its peak. We projected 75% in June of 2005. The decline in building is probably bottoming, but with the inventory overhand it could be many years until we could see a recovery.

Durable goods orders rise of 0.2% were very disappointing. The experts expected a rise of 0.5%. Wrong as usual.

For the week ended 12/23 the commercial paper market rose $9.3 billion to $1.160 trillion, still a ghost of its former self.

Congress, the SEC and FINRA are investigating Goldman Sachs and others in the use of synthetic CDOs, collateralized debt obligations, that we have been hammering for since 2006. Not only were the laws of fair dealing violated, but they were shorting the deals they sold to clients, which they knew had to fall in value, because the ratings they arranged with the raters, S&P, Moody’s and Fitch, were phony from the outset. Yet if you notice there hasn’t been a lawsuit, civil investigation, or criminal charges. The exposure of this activity allowed the banks to profit from the housing collapse, which they deliberately created. Again, another fine and no criminals go to jail. They simply own Washington. 

The 10-year T-note yield just rose from 3.20% over the past 18 business days to 3.80%. Look at a chart and it is ominous. The yield is on long-term trend lines that go back to June 2007. It looks like that line could be broken to the downside. The chart is very jagged giving it all the earmarks of manipulation. Our guess is that something happened three weeks ago that we don’t yet understand, but whatever it was foreigners are running away from US sovereign debt, just as we forecast they would. This means the fed could be taking down more than 60% of the auctions of US debt, which means more monetization and more inflation. If the Fed does not continue buying, by creating money out of thin air, support will be broken and yields could quickly move up to 5%, which would further destroy the retail housing market. Such a move would send gold to $1,550 to $1,650. Incidentally, over the past 50 years we have observed that as interest rates rise so does gold and silver, up to a certain point. In this case bank discount rates could move from zero to 5% and gold would rise. After that gold becomes the only vehicle that preserves assets.

Our sources within the banking industry tell us banks are not lending to small businesses because Marxist Obama wants to crush the small business industry. If out of business they cannot create jobs. They create 75% to 90% of all jobs. That means everyone ends up on the government payroll just as they did in the Soviet Union. This is part of Barry’s new Orwellian world. The end game is everyone is dependent on government.

The health care bills are unconstitutional, but that is of no concern to Congress. Just start with mandatory insurance for all. The healthy subsidize those who live a profligate lifestyle. What we have is a cross between socialism, Marxism and fascism. This is being caused by bribery, which is nothing new for our Congress. Bills are passed by meeting the demands of the highest bidder. This is how Rome fell; whoever could buy the Army was dictator. We do not have a dictator yet, but the elitists are behind the scenes pulling the strings. So many are on the take it is almost impossible to reverse such legislation, short of throwing out all the incumbents. We would like to see that, but have enough Americans awakened? We hope so. We will know next November. Democrats have blown their biggest chance for permanency in decades by serving the brotherhood of darkness. As they have shown their constituents and their desires mean nothing to these crooks. The Christmas present was another increase in short-term government debt and gift-wrapped tax burdens in health care, as their voters resoundingly screamed they do not want them.

All conferencing was done in secret to prepare a 2,000-plus-page albatross that virtually no one in Congress read. They figure you won’t remember what they did nine months from now. We get socialized medicine and those who do not carry insurance because they are too poor or do not need it, will have to pay a fee to government. We will lose 25% of our physicians and as a result care will deteriorate and many will die as they wait in line for treatment. Then comes the increased prescription costs, which are already outrageous compared to Canada and Mexico, and then the chronically ill and the old will be allowed to die. If you do not stop these two bills you will eventually be one of its victims. The Illuminists want this bill so bad that they are willing to doom every Democrat that he or she will never return to office.

The forces of darkness purchased the votes to pass this bill in the Senate. Mary Landrieu, a Democrat, received $300 million for her state and Ben Nelson received millions for Democrats in Nebraska as well. There were more payoffs, like $300 million for California and even AARP got $18 million. The legislation contains massive abortion funds for murder on demand. The cost of this duplicity starts at $2.5 trillion. Needless to say, this is all unconstitutional, but these politicians and their masters simply ignore our law of the land. Just check out Article 1, Section 9, Part 6, which clearly states, “No preference shall be given to any regulation of commerce or revenue to the ports of one state over another,” and Article 4, Section 2, which says, “the citizens of each state shall be entitled to all the privileges and immunities of the citizens of several states.”

You will be forced to pay $2.3 billion in excise taxes passed on to you annually by the pharmaceutical industry and higher prices for medical devices from $2 billion in additional taxes. Then there is the $11 billion excise tax on the health care industry you will be forced to pay. There are 19 tax increases in all, including a $750 annual tax penalty for those who cannot pay for or do not want health insurance and that will grow in cost year after year. Then there is the reduction of the amount that can be deducted for health care expense on your tax return, plus a 3.6% tax on couples making over $250,000 a year. This is sheer meanness.

PEW says 58% of Americans oppose both bills and other polls show up to 68%. Only 32% favor the bills.

Labor will receive $10 billion in a phony reinsurance program and non-union employees would be excluded in program-funded contracts. The language means forced unionization. All health care workers will be forced to join unions, including doctors and nurses. These bills are main cogs in the Soviet-ation of America. This is a change no one believes in and no one wants. The young will pay for this by subsidizing the graft and the elderly by seeing premiums jump 200%. The 40-something year olds will see a 100% jump. Of course, there is the $500 billion being pulled out of Medicare to fund health care for illegal aliens, who soon will be made legal. Quality healthcare is history except for the rich, the politicians and the Illuminists. All health care corporations will essentially become subsidiaries of government. Doctor-owned hospitals will fade into the past. Their existence is doomed. In 2010, Medicare payments to doctors will fall 21.5% and more in following years. Both bills, particularly the Senate version are a new welfare and tax system. The AMA sold out the doctors. Government will control 55% of medical spending.

Will the final bill be legally challenged? We hope so. The problem is by the time it gets through the Supreme Court, even if the bill is unconstitutional, the damage it will cause to the system will be terrible. The only reason this bill was a must pass for Congress was that the people in control had to pass it before the public understood what the consequences were. The bills are structured to tax Americans into oblivion and then give them a totalitarian Socialist, Marxist, Fascist dictatorship. 

Where in the Constitution does it say we have to buy health insurance or that if we do not we will get fined?

Where does it say in the Constitution that Congress can prohibit changing a law unless it is by a 2/3’s vote?

Where does it say in the Constitution that an Independent Medicare Advisory Board cannot be repealed by future Congresses? In the Senate it takes a 2/3’s vote to change the rules, whereas the Democrats plan to pass this legislation with only a majority. If passed, this legislation has to be challenged and you are the way to do it. E-mail, fax, call and write every Senator and representative, and let him or her know how you feel about the health care legislation. If that doesn’t work let them know they will never be returning to Congress again. We asked the public to do this a year ago, and few listened. They had best listen now. If you do not get these people out of office you could well end up in an internment camp.

America and England are facing a credit crisis again, as interest rates rise and the Fed feebly attempts to remove quantitative easing, and beginning by withdrawing funds from its various programs. Rating services tell us that if the Fed does not do so the US and UK credit ratings will be lowered. These funds put into the system by the Fed and the Treasury aggregate about $12.7 trillion. We might add the US and the UK are not the only countries enveloped in this situation. We have seen the US ten-year Treasury note yield move from 3.20% to 3.80%. This is the markets way of telling the Fed and the Treasury, that if you continue to do what you have been doing then you will have to pay more interest to do so. Those 10s could easily move to yield 5% in this coming year, putting the 30-year fixed rate mortgage over 6%. That in finality puts the last nail in the coffin of the residential housing market. At the same time since last May inflation has been building and now is at an official 2.4% and unofficially 8-1/4%. The Fed and other major nations are now attempting to hold up the dollar, it having rallied just recently from 74 to 78 on the USDX. Aligned against these nations are a group of commercial currency market makers, who are shorting the dollar in response to its phony rally. The pros will win and the governments will lose. That is a $4.3 trillion a day market of which $2.5 trillion trades in dollars. Not even Superman can control that massive amount of money. Due to the Treasury’s profligacy the Fed we suspect has already bought more than $600 billion in Treasuries; $300 billion that they admit too and $300 billion or more they refuse to tell you about. That is why we need an audit of the Fed.

The Fed, the Bank of England, and others will not be able to ease funds out of the system without allowing deflationary forces to take over. The result will be a downgrade, a run on the dollar and official devaluation and default within the next 1-1/2 years. There is no other way out, as other nations are forced to do the same thing, leaving the only safe haven of wealth preservation in gold and silver related assets. Nothing will compare. All world currencies will fall versus gold. In the meantime, the wages of easing and the inability to withdraw these funds, will lead to a period of inflation if not hyperinflation beginning with a real 14% plus in 2010. After that it is anyone’s guess where inflation will be headed.

The present administration is headed in the wrong direction on everything, particularly on spending. Their actions have resulted in short-term bills yielding from zero to .65%, hardly an incentive to own such debt, as the Fed must issue and or roll this debt daily. A bogus temporarily strong dollar supplies a lift and respite for treasury debt for which the only solution is higher rates that are already being anticipated. Some have seen our ideas on this issue as faulty, all we can say is we are the ones with the 98% track record. 

We must have done 100 radio programs on the global warming hoax prior to the exposure of the East Anglia E-mails and the fiasco that became the Copenhagen Conference. We hope we were able to offer a small window of light on this scam. The weather during and since that conference in the temperate climes has been snow filled and bitterly cold. Even temperatures in tropical zones have fallen into the 50s and some cases into the 40s during December. We shared one program with Senator Inhofe who blasted this scam for what it is. His bottom line is such an agreement signed at Copenhagen and Cap & Trade legislation cannot be passed. After such statements our President said he would bypass Congress and implement it via his administration under one of his czars. This goes to show you what our President thinks of our Constitution. He believes he is a dictator. Mr. Obama, via Secretary of State Hillary Clinton, informs all that the US was committed to giving $10 billion a year in 2010 of $100 billion a year as a subsidy to the third world. This is exactly what the Soviet Union would have done. The bottom line is there is no global warming. It was to present a system of redistribution of wealth which we first wrote about in 1967. An effort to raise world taxes due to global warming by 20%, create a worldwide market in the trade of carbon credits and base a new world currency on climate change. This is all a scam and insane, but do not expect these Illuminists to give up, they won’t. As an example, at Copenhagen they simply ignored the criminal academic scandal caused by the e-mails exposing this fraud. Do not forget they control the mainline world media and much of the public doesn’t know what we have writing here. It is up to you to let them know that global warming and climate change is a fraud. If you don’t we will all suffer the consequences of a One-World government. 

THIS HAS GOT TO BE THE MOST OUTRAGEOUS STATEMENT EVER MADE BY A PUBLIC OFFICIAL LET ALONE BY THE PRESIDENT OF THE UNITED STATES. AND THIS GUY IS OUR “COMMANDER IN CHIEF”.  HE IS A DISGRACE.
UNBELIEVABLE PRESIDENT???

HERE IS HIS RESPONSE WHEN HE BACKED OFF FROM HIS DECISION TO REQUIRE THE MILITARY PAY FOR THEIR WAR INJURIES.
WHAT AN EMPTY HEADED PERSON HE MUST BE…. 

Bad press, including major mockery of the plan by comedian Jon
Stewart, led to President Obama abandoning his proposal to require veterans carry private health insurance to cover the estimated $540 million annual cost to the federal government of treatment for injuries to military personnel received during their tours on active duty. The President admitted that he was puzzled by the magnitude of the
opposition to his proposal.

“Look, it’s an all volunteer force,” Obama complained. “Nobody made these guys go to war. They had to have known and accepted the risks. Now they whine about bearing the costs of their choice? It doesn’t compute…” “I thought these were people who were proud to sacrifice for their country, “Obama continued “I wasn’t asking for blood, just money. With the country facing the worst financial crisis in its history, I’d have thought that the patriotic thing to do would be to try to help reduce the nation’s deficit. I guess I underestimated the selfishness of some of my fellow Americans.”
Please pass this on to every one including every vet and their
families whom you know. How in the world did a person with this mindset become our leader? I didn’t vote for him!!! REMEMBER THIS STATEMENT… “Nobody made these guys go to war. They had to have known and accepted the risks. Now they whine about bearing the costs of their choice?” If he thinks he will ever get another vote from an Active Duty,

Reserve, National Guard service member or veteran of a military service he ought to think it over.. If you or a family member is or has served their country please pass this to them. Please pass this to everyone.

As we reflected on the rise, and probable fall, of America’s empire, it became clear to me that there were three fatal deficits at the heart of American power: a manpower deficit (not enough boots on the ground in Iraq), an attention deficit (not enough public enthusiasm for long-term occupations of conquered countries) and above all a financial deficit (not enough savings relative to investment and not enough taxation relative to public expenditure). 

         Back in 2004 I warned that the US had imperceptibly come to rely on east Asian capital to stabilise its unbalanced current and fiscal accounts. The decline and fall of America’s undeclared empire might therefore be due not to terrorists at the gates nor to the rogue regimes that sponsor them, but to a fiscal crisis at home. 

         The realisation that the yawning US current account deficit was increasingly being financed by Asian central banks, with the Chinese moving into pole position, was, for me at least, the eureka moment of the decade. 

        When, in late 2006, Moritz Schularick and I coined the word “Chimerica” to describe what we saw as the dangerously unsustainable relationship between parsimonious China and profligate America, we had identified one of the keys to the coming global financial crisis… 

         What gave the west the edge over the east over the past 500 years? My answer is six “killer apps”: the capitalist enterprise, the scientific method, a legal and political system based on private property rights and individual freedom, traditional imperialism, the consumer society and what Weber probably misnamed the “Protestant” ethic of work and capital accumulation as ends in themselves. 

         Some of those things (numbers one and two) China has clearly replicated. Others it may be in the process of adopting with some “Confucian” modifications (imperialism, consumption and the work ethic). Only number three – the Western way of law and politics – shows little sign of emerging in the one-party state that is the People’s Republic.

Retribution is less than 1 year away!

Take a look at this and just remember elections in Nov. 2010.   

 U.S. House & Senate have voted themselves $4,700 and $5,300 raises. 

1.     They voted to not give you a S.S. Cost of living raise in 2010 and 2011.. 

2.     Your Medicare premiums will go up $285.60 for the 2-years and 

You will not get the 3% COLA: $660/yr. Your total 2-yr loss and cost is

-$1,600 or -$3,200 for husband and wife. 

3.     Over 2-yrs they each get $10,000 

4.     Do you feel SCREWED? 

5.     Will they have your cost of drugs – doctor fees – local taxes – food, etc., increase? 

NO WAY. They have a raise and better benefits. Why care about you? You never did anything about it in the past. You obviously are too stupid or don’t care. 

6.     Do you really think that Nancy, Harry, Chris, Charlie, Barnie, et al, care about you?  SEND THE MESSAGE–  You’re FIRED. 

IN 2010 YOU WILL HAVE A CHANCE TO GET RID OF THE SITTING CONGRESS: 

           Up to 1/3 OF THE SENATE, AND 100% OF THE HOUSE. 

MAKE SURE YOU’RE STILL MAD IN NOVEMBER 2010 AND REMIND THEIR REPLACEMENTS NOT TO SCREW UP. 

It is ok to forward this to your sphere of influence if you are finally tired of the abuse. 

Maybe it’s time for the……… 

Amendment 28

“Congress shall make no law that applies to the citizens of the United 

States that does not apply equally to the Senators or Representatives, 

and Congress shall make no law that applies to the Senators or 

Representatives that does not apply equally to the citizens of the 

United States.” 

Let’s get this passed around, folks – these people in Washington have brought this upon themselves!!!  It’s time for retribution.  Let’s take back America.

If you don’t forward this to all your friends you’re just part of the problem of national apathy.