Miles Franklin Daily Gold & Silver Summary

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Market Recap for

Tuesday October 9, 2012


$1764.90 Up $11.60


GOLD - one year ago today

Up $126.20



$33.83 Down $0.07


SILVER - one year ago today

Up $2.56



$1682.00 Down $8.00



$654.00 Down $2.00



499.64 Down 11.09



186.13 Down 3.95



79.99 No Change



1.2877 Down 0.0091



13473.53 Down 110.12



52.17 to 1

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quoteQuotes of the Day

Did Eisenhower's observation that "Any man who wants to be president is either an egomaniac or crazy" apply to Mitt Romney and President Obama? The former has been campaigning for the office since 2007 and President Obama has been on the re-election campaign trail since April 2011.
- Gerald Celente

I find myself continually explaining to people that don't own gold (or silver) that it's not a useless, barbaric relic that people that don't own gold like to refer to it as. But once investors own gold (or silver), they see what all the hubbub is about. They see what countries around the world are doing to their respective currencies, and if there is a financial catastrophe, then gold is the only asset that can offer protection. I tell people that owning gold (or silver) is like an insurance policy for your wealth. And just like any insurance policy, you hope you never have to really use it, but if you do have to use it, you're happier than a lark that you had the insurance!"
- Chuck Butler

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daviddeskFrom David's Desk 

David Schectman 

It couldn't be more obvious. Someone or some group is manipulating the gold (and silver) market in an effort to keep gold below the new "line in the sand" at $1,775 (and Silver at $35). Jim Sinclair said yesterday:

There were three body blocks today at cash gold $1775. Some political party does not want a run to $1900 plus going into the election. With this clear intention to hold the line, $1775 gains significance as a manipulator's line in the sand. Gold and the euro are holding hands in the same direction.

Ted Butler, Ed Steer and Bix Weir are certain it's JP Morgan. Butler says:

In percentage terms...and on a net basis...the 'Big 4' are short 37.1% of the Comex futures market in gold...and the '5 through 8' are short another 13.2 percentage points. Add it all up, and the 'Big 8' are short 50.3% of the entire Comex futures market...almost as bad as their collective short position in silver, which is 54.7 million ounces. How obscene and grotesque can you get?

Through all of this...the regulators and your precious metal companies...see nothing, say nothing...and do nothing!

Trader David R laughs and says it's the Mega-Hedge Funds and the Algos.

Richard Russell says, "It should be remembered that what we are seeing is no normal Fed manipulation of the market." Russell has finally come around to admit that the markets are manipulated. He also points out that if Romney were to win the election, he would can Bernanke, so Ben is doing whatever it takes to help Obama win a second term.

According to Occam's Razor, "Other things being equal, a simpler explanation is better than a more complex one." Which of the above viewpoints best fits Occam's Razor? I think I'll go along with Jim Sinclair and lay the blame at the feet of the Federal Reserve and the US Treasury. That still leaves room for the JP Morgan gang, since JP Morgan is the "government's bank" and it only makes sense that they would be involved in carrying out their policies.


The most critical thing for the Fed and Treasury to control is the perception that the U.S. dollar is a "safe" store of value. How else can we expect to sell over one trillion dollars worth of bonds every year to fund our deficit? How else can we expect the Chinese and all of the other foreign banks and treasuries to hold dollar-denominated bonds?


There are already massive pressures building against the dollar. China, India, Russia and a host of other countries have signed contracts to trade with each other in their own currencies and gold and bypass the dollar. Gold is at or very close to all-time highs in the Rupee and the Euro and is signaling that it is a safer and smarter alternative to the dollar. If gold were allowed to cruise past $2,000, the pressure on the dollar would intensify and that would be bad news for Obama and the Democrats, especially with the election less than a month away. Kill the messenger! Stop gold from rising and signaling that inflation is roaring.


Hey, if they stoop to falsifying the latest employment numbers, and yesterday there were several articles in this newsletter that discussed it, why wouldn't they also sit on the precious metals price? Of course they would.


In today's issue, there is an excellent essay by Paul Craig Roberts, writing for The Trends Journal, that lays bare the government's manipulations. (Paul Craig Roberts is an American economist and a columnist for Creators Syndicate. He served as an Assistant Secretary of the Treasury in the Reagan Administration earning fame as a co-founder of Reaganomics.) It is a very small step from manipulating financial numbers and statistics to manipulating the price of gold and silver to further the "illusion" that the dollar is strong and inflation is at bay.


Once the markets decide that inflation is a threat, interest rates will rise and that is when the music stops in our game of financial musical chairs. It will happen soon enough, but TPTB will do everything necessary to see that it is after the election.


So, my vote for the most likely candidate in the gold and silver manipulation conversation is - our current administration via the Treasury, the Fed with help from their banker, JP Morgan.


Today, we start off with excerpts from The Trends Journal's Fourth Quarter Report. It is long - some 48 pages, and it's really good. Along with John Williams Shadowstats, The Trends Journal is a publication that I urge all of our readers to subscribe to. These two publications will set you straight when it comes to honest reporting on the economy, inflation, employment and in the case of Gerald Celente's The Trends Journal, the next four years, which will be very difficult. In fact, Celente expects a World War and a Hyperinflationary Great Depression. So, I suggest that you sit down, have a stiff drink or two and read ALL of his latest forecasts. They make a lot of sense to me and his track record is outstanding.


And while you're at it, be sure and read Rick Ackerman's essay today. It is even direr than Celente's.






David Schectman

Miles Franklin


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trendsThe Trends Journal (

The Trends Journal - Autumn 2012

Lesser of Two Evils


Spinning Bad Financial News Into Good

by Dr. Paul Craig Roberts

Friday's payroll jobs report says that 96,000 new jobs were created in August and that the unemployment rate, known as the U.3, fell from 8.3 percent to 8.1 percent. As 96,000 new jobs are not enough to keep up with population growth [150,000 per month is needed], the decline in the U.3 unemployment rate was caused by 368,000 discouraged job seekers giving up on finding employment and dropping out of the work force.

Discouraged workers are not included in the U.3 mea- sure of unemployment, which makes the measure useless. The only purpose of the U.3 is to keep bad news out of the news. The U.3 unemployment rate only measures those who have not been discouraged by the inability to find a job and are still actively seeking employment.

The government produces another unemployment measure, the U.6, which includes people who have been discouraged by the inability to find a job and have been out of the work force for less than a year. This measure of unemployment is 14.7 percent, a number that would get plenty of media attention if reported.

When the long-term (more than one year) discouraged workers are included, the US unemployment rate is about 22 percent. In other words, the real US rate of unemployment is almost three times higher than the reported head- line rate of 8.1 percent.

What is the purpose of reporting an unemployment rate that is about one-third the real unemployment rate? The only answer is deception through Happy News.


Let's have a look at those 96,000 jobs. What kind of high- tech, high-income super jobs is "the world's only superpower, the indispensable nation, the world's greatest economy and capitalist heaven" creating? The answer is... lowly paid Third World jobs, which is why there is not and cannot be an economic recovery. All the good jobs have been moved offshore in order to maximize the incomes of the rich.

According to the US Bureau of Labor Statistics (BLS), 28,300 of the 96,000 jobs, or 29 percent, are waitresses and bartenders.

Health care and social services, primarily ambulatory health care services and home health care services, pro- vided 21,700 jobs or 22.6 percent of the jobs.

So, 52 percent of the new jobs created by the American superpower are lowly paid waitresses, bartenders, practical nurses, and hospital orderlies.

Highly paid manufacturing jobs declined by 15,000. The incomes lost by these jobs most likely exceed the in- come gains from the waitresses, bartenders, and hospital orderlies jobs.

Where did the other 46,000 jobs come from?

Formerly, in hard times, government employment would expand but, despite Republican propaganda, not in today's mean times. Government (federal, state and local) lost 7,000 jobs.

Professional and business services gained 28,000 jobs, primarily in computer systems design and related services (mainly Indians on H-1B work visas) and management and technical consulting services (mainly former corporate professional employees who now eke out a living by consulting for their former employers, without pension or health benefits - in other words, people who are working the same jobs for less money).

These three categories account for 81 percent of the new jobs.

Where are the remainder?

There are a few thousand new jobs in finance and insurance, jobs that absorb consumer incomes but produce no product. Telephone, cable, water, electricity, and heating produced 8,800 jobs. Transportation and warehousing to store unsold goods produced 5,700 jobs. Retail trade, primarily food and beverage stores (alcohol), produced 6,100 jobs.

And there you have it. The "powerful American economy" is an economy that cannot produce its own clothes and shoes, or the manufactured products, including high technology products, that it consumes, or its own energy, all of which it imports by issuing more debt.

The "great hegemonic American economy" is on the verge of total collapse because the only way it can pay for the imports that sustain it is by issuing more debt and printing more money. Once the debt and money creation undermines the dollar as the world's reserve currency, the US will become a Third World country, much to the relief of the rest of the world.

On September 9, Mario Draghi, the head of the European Central Bank, announced for propaganda purposes that the ECB would buy up the sovereign debt of the troubled EU member governments if, and only if, the assisted member governments agreed to the conditions that would be imposed.

In other words, Draghi told Greece, Spain and Italy, "The ECB will buy your bonds if you do what we tell you!" Draghi's conditions are a combination of austerity measures and the surrender of financial sovereignty. Since the troubled debtor countries already had that option, Draghi's scheme doesn't change anything. However, the NY Stock Exchange used Draghi's announcement to gin up day-trading profits.

Draghi says that the money that the ECB will pour into purchasing Greek, Italian and Spanish bonds will be off- set by draining reserves from the European banking sys- tem, hardly a helpful operation to stressed banks and the European recession.

It is difficult to imagine worse news than Draghi's. Yet stock markets rose. This result is more evidence that financial markets are not to be trusted.

But you will never, ever, hear this fact from the financial press.

A financial system based on lies and deceptions cannot last forever.

Trend Forecast: The collapse should have occurred immediately following the Panic of '08, an economic explosion that reverberated around the world. Although the collapse was postponed by schemes undreamed of - rescue plans, bailouts, stimulus and rounds of quantitative easing engineered by successive administrations and the Federal Reserve - the trillions spent, borrowed and loaned would provide only symptom relief for what was a chronic, degenerative economic condition.

Back then, there was no way for us to predict that Uncle Sam, incessantly championing himself as a capitalist, would prove to be a closet fascist - merging state and corporate powers and stealing trillions of the people's money to bail out too-big-to-fail banks, financiers and transnational businesses.

But regardless of what scams they would try and what- ever politicians and Wall Street promised, Gerald Celente saw through the con game and was certain that what was being touted as "recovery" was, in fact, the greatest financial cover-up in history. (See Trend Alert: Celente on Russia Today - "Cover up, not Recovery," 15 September 2009)



We said they would do it before the election, and they did it! The Americans called it quantitative easing (QE3), the Europeans called it a euro rescue fund and bond intervention (unlimited government bonds purchased from troubled eurozone nations) while the Chinese and Japanese called it "stimulus." Desperate to prop up their failing and flagging economies, the nations' digital presses began pumping out trillions of dollars, euros, yuan and yen that were not worth the paper they were not printed on.

Month after month, the data - imports, exports, job numbers, industrial production, real estate, retail sales - added up to recession, stagnation, depression. The world over, it was a variation on the same theme. In countries that had until recently been booming there was, at best, minimal growth.

Although a global economy had been in place for decades, individual nations perpetuated an illusion of sovereignty and independence. But now, in September 2012, that illusion has been shattered. It was all inextricably connected, and the common denominator by any name (dollar, euro, yuan, real, rupee) was money, with the central banks working in concert to make sure the money kept flowing.

In August, the overriding economic concern had been how to solve the European debt crisis - a crisis that euro leaders had initially denied would occur and then, over the past two years, repeatedly claimed to have resolved. Now that crisis threatened the euro, the cohesiveness of the eurozone and by extension, not only the global economy but geopolitics.

Indeed, it was all connected. As we have frequently emphasized, when Europeans and Americans cut consumer spending, the Chinese and other low-wage manufacturing nations cut production. And when they cut production, resource-rich countries such as Australia, Brazil, Bolivia, Chile, etc., export less. Thus it was about more than just money. Anything done to forestall and/or repair the economic crises was to the advantage of the incumbent political parties:


Robbing Hoods   In the United States particularly, the cheap-money, low-interest-rate policy hit the general public, long conditioned to build their savings accounts, the hardest. With Fed interest rates now at or near zero, and scheduled to remain there for three more years, the old ad- age, "A penny saved is a penny earned," had become, "A penny saved is a penny devalued."

Once upon a time, in the old pre-QE days, responsible people would put money away for a rainy day or to support them through their retirement years. The quaint notion was that rather than spend it in on consumer products or invest in risky equities, people would save money in a bank and in return they would earn interest. It had long been the American Way - but it no longer was.

People with extra earnings had two choices: invest in equity markets and take a risk, or put it in the bank and watch their savings devalue as the inflation rate rose. So egregious had the saving scam become (we take your money and give you back next to nothing) that bankers, unable to pitch it with a straight face, hired comedians:

Theoretically, only those Americans with the means to deposit $5 million dollars in a bank would be able to earn a modest American median income of $50,054 at 1.00% interest, a sum that would hardly allow them to live the lifestyle to which they were accustomed.

But given an annual inflation rate of 9 percent - using the 1980 official methodology for measuring the CPI - at the end of the year, the $5 million in the bank had declined in value by $450,000. Such a deal! Put your money in Capital One - and watch it lose eight percent in a year! Needless to say, no one with $5 million to spare would put it in a bank at 1.00 percent. But for millions of Americans, the insignificant interest rate return has taken away a time-honored savings safety net.


Trendpost: What are the investment options in a "No Recovery, More Decline, Potential Disaster" global economy?

Precious Metals: Since we are not registered financial advisors, and thus not permitted to provide investment advice, speaking only for ourselves, we maintain our de- cades-long strategy to buy gold and silver. With the world money presses whirring away, we see no profit potential in holding nations' "print on demand" fiat currencies, especially when issued by nations that can't pay their bills and that keep piling on more debt. We also want to emphasis that while we continue to forecast Gold $2000-plus, there is a real possibility for market manipulation and/or government intervention. Considering that rising gold prices are anathema to fiat currency based central banks, it would be in their interest to dramatically drive the price down.

Nevertheless, as we have also long maintained, for us, gold is our security for our golden years. In an uncertain world, where so-called legacy stocks and sound retirement funds disappear overnight, gold and silver are tangible assets that, even should they lose market value, will always have value.

Again, understanding that we do not provide financial advice, if you believe in gold and silver, one strategy to consider is buying what you can afford each month. Thus, over time, despite dramatic fluctuations, the price could be favorably averaged out.

One More Time No Recovery, More Decline, and Potential Disaster is what we have been warning about since the onset of the Panic of '08. We predicted that his- tory would repeat itself, and it is now doing so.

First there was the Panic of '08, then the Great Re- cession/Depression, followed by an intensifying currency war. And, now the trade wars are beginning to heat up. In the US, both presidential and congressional candidates are ratcheting up the anti-China rhetoric, blaming America's economic troubles on unfair Chinese trade practices and currency manipulation.


To read the full quarterly report Subscribe to the Trends Journal

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Reliable Financial Advisors

In a world of heightened speculative and counterparty risks, finding someone you can trust may be the most important research you do. Miles Franklin does not sell stocks, but is frequently asked if we know of reputable, full-service brokers. WE DO NOT CONDEMN OR CONDONE EQUITY INVESTMENTS, but want investors with such interest to be honestly and competently handled.

In resource stocks, the folks at Sprott Global Resource Investments - managed by Eric Sprott and Rick Rule - are the best in the business. In various capacities, we have worked with Eric Angeli, Jeff Howard, Kenton Toews, Mishka vom Dorp, Jason Stevens, Anthony Marsh, and Andrew Jackson - all of whom are diligent, ethical, and knowledgeable. That style of business is indicative of the reputation Global has built over the past 25 years. You can feel comfortable with any of their brokers, reachable at 800-477-7853.

For all other stocks - including large cap gold, silver and other resource equities - Nick Shermeta, from Northland Securities here in Minneapolis, is as trustworthy and knowledgeable as they come. Nick is a Senior Vice President with more than 20 years experience, but will treat you as if you were his only client. You can reach Nick at 612-851-5908, or by email at

The common denominator is decades of Wall Street experience, which should give you comfort that well-seasoned and weathered hands are helping manage your portfolio. Notably, we do not receive compensation for these recommendations. We just want you to know that if they are good enough for us, they should be good enough for you too.

ackermanRick Ackerman (

A Dark Vision of Things to Come

by Rick Ackerman on October 8, 2012

[Erich Simon, author of jeremiad below, is a hard-core survivalist and the second most bearish person we know, out-doomsdayed only by a Nostradamian pen pal who believes, for starters, that two World Wars will be fought within a generation.  Although we shudder to imagine a world in which all of Erich's predictions have come true, we do not think his fear is misplaced that Americans will awaken one morning to learn that the banks have closed indefinitely. Our suggestion is that you keep a shoebox filled with $1s, $5s, $10s and $20s for that day, since "plastic" will be useless.  Much more elaborate preparations will be needed, however, if you share Erich's very dire outlook. RA]

The financial vultures are all around.  Things took a sharp turn for the worse three years ago, when a wave of store-closings turned strip malls across America into eyesores.  In just one year, 42,000 manufacturing businesses in the U.S. closed shop. But the recent announcement by the Fed that it would "buy" $40 billion of mortgage-backed securities every month was a defining moment. What can it hope to accomplish?  Printing-press money no longer subsidizes anyone but fat cats - corporate VIPs who can flee in their Learjets to the Southern Hemisphere when troubles that have simmered for years finally reach a boil.


A generation ago, it took $2 of debt creation to generate a dollar's worth of GDP. Then it took $5...and then $7 before Obama pushed the number off the chart.  Now, there is no longer measurable growth relative to each new dollar of credit" stimulus." In fact, despite all the QE Bernanke can gin up, the economy is sliding backwards. Production is contracting and unemployment is poised to take off, even as new hires take jobs that will never pay them anything close to a living wage. The young are beyond disenfranchised: They are desperate and forlorn. We have reached the point where every newborn faces worsening odds of accumulating wealth to pass on to descendants. So much for the American Dream.

Synchronous Downturn

As for the global economy, it is slipping into a synchronized downturn that will make it far more difficult for the mass of newcomers to attain wealth.  The economy is past the point of inflection, nearing exponential collapse: currency, debt, food, energy, water, infrastructure - all of it. That's why there are so few jobs remaining. And The Government knows it. They understand that we are now a two-tiered population of haves and have-nots, as Bernanke acknowledged a year ago, with the have-nots skirting subsistence. This is the endgame of an economy based on credit and consumption: a slave class living from paycheck to paycheck; a middle class turned into federally subsidized debtors; and a shakeout, since 2008, of the top 1%, including the super rich (CEOs) and the ultra rich (dynastic property hoarders with dwindling cash flow).

It is at the level of the top 1% that the economic battle has been raging as the super rich, living off debt and beyond their means, fight to keep up with the ultra rich, even as the other 99% gets left in the dust, unable to sustain themselves.  Stressed to the breaking point and exposed to random violence such as the recent, homicidal spree at a Colorado move theater, they are suffering from a kind of profound mental fatigue. The economy, meanwhile, is completely hollow now. The Invasion of the Economic Body Snatchers is complete, with the U.S. evolving into a Third World Police State and the banks set to reclaim all real estate everywhere amid a epic upheaval of social restructuring.

An Extended Bank Holiday

We will awaken one day to learn that the banks have closed, perhaps never to reopen. This has seemed inevitable since the events of 9/11 altered the rhythms and routines of the U.S. economy. The banks may even be torn down, burned in effigy of a system that destroyed us all and enriched the thievery of the greedy and militaristic few, turning frontier dreams of prosperity into a dictatorship ghetto.

We are close now, very close. Every business I come in contact with is on the ropes - most recently, a corporation with rental properties in three states that has been deluged with vacancies and collection notices. There's my medical insurer, which has taken nearly two years to pay a claim related to a shattered shoulder. Even worse, there are scam artists everywhere, and all too many businesses adopting flim-flam tactics. Meanwhile, prices for necessities continue to rise, fueling even more desperation on the part of businessmen.  It reminds one of the imploding USSR, where, corruption was pervasive and riches went not to the doctor or dentist but to political overlords.

Speeches Written

Like the Titanic, the economic ship is going to sink in a matter of hours. I'd bet that speeches are being scripted in preparation for this. We are that close. (Over the last decade or so, the Christmas holiday season has been squeezed into a shorter, manic shopping spree that has come to resemble a rush hour in the last couple of days.) One should expect gunfire from lone wolfs and organized groups in proximity to the upcoming bank holidays - quite literally men not just without futures, but without their next meals.

Things are going to get bad, and soon. The financial scavenger-vulture "bartenders" who short-change customers and swipe dollars off the "bar" are not the social disease, they are the symptom. The disease is a Fed misallocation of credit that has corrupted the economy, and with it the entire social order. The money-printing disease augurs a bottleneck of...everything.  We are facing a technological exploitation of a finite habitat overrun suddenly by a population blowoff. That is what everyone is preparing for, skimming and stealing across all levels of all businesses - a currency grab in the final hour, just before the dash for the exits, a mad scramble to buy safety and survival for themselves and their families.

A Sniper's Fear

A member of my survival group, an Army Ranger sniper who retired after nine years' service, has dug a hollow in the forest behind his house and fortified it with clothes, guns and food for his wife and two young children. I thought that it was to protect against civilian marauders. Imagine my surprise when he told me it is to protect against our own military. According to his sources who are still in the service (in what is a very youthful military/National Guard, plans are being discussed that would have soldiers and Guardsmen go door-to-door confiscating food, wealth, guns, etcetera - all in the name of national security. Redistribution to keep the peace. Or is it going to be mostly spoils to weld soldier loyalty? The more things change, the more they remain the same.

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turkJames Turk (

Determining the value of gold


When considering whether gold is a value investment, one needs to first recognize that gold does not have a balance sheet, management team, price-earnings ratio or any of the other things one needs to analyze before making an investment. Also, gold does not generate any cash flow, so it does not pay a dividend. We can therefore conclude from these observations that gold is not an investment. Indeed, it is something different, which means that normal investment analytical techniques cannot be used to determine gold's value.

Value of course arises from an item's usefulness, and gold is useful because it is money. Though only used as currency these days in a few places like Turkey and Vietnam, gold is still useful in economic calculation, or in other words, measuring the price of goods and services.

For example, when the Maastricht Treaty was signed in February 1992, one barrel of crude oil cost $19.00, €15.95 (Dm 31.30) or 1.67 goldgrams. Now it costs $91.79, €71.27 or 1.61 goldgrams, which makes clear that not only is gold useful in communicating prices, it preserves purchasing power. Gold has been useful in these ways for over 5,000 years, so it is logical to assume that gold will remain useful for the foreseeable future.

Some say that the gold price rises and falls, but they are grabbing the wrong end of the stick. It is the purchasing power of national currencies that rise and fall. Here is an analogy to make this point clear. When standing in a boat and looking at the shore, it is the boat (currencies) - and not the land (gold) - that is bobbing up and down.

Currency fluctuations occur in the short-term, but over the long-term, a currency's purchasing power is continually eroded from inflation and other debasements inflicted on it, as is clear from the example above showing changes in the price of crude oil. There is, however, a subtle but more important point to make here.

Gold does not create wealth. It cannot possibly do that because it does not generate cash flow. Remember, gold is not an investment; it is money, and these two things are entirely different. So when the price of gold rises, wealth is simply being transferred from people who hold currency to people who hold gold. This wealth being transferred already exists. It is wealth held in the form of purchasing power.

Lastly, is gold good value? This is a question that each of us must answer by ourselves because value is subjective. But to me the answer is clear. Gold is indeed good value because it is a useful money, not prone to the problems perennially plaguing national currencies.

Further, gold is good value because it is not over-priced, a conclusion that can be reached by simply considering supply and demand. Even though the gold price has been rising this past decade, the supply of national currencies is being created much faster than the supply of gold. Second, the demand for gold understandably continues to rise as it offers a safe-haven from the ongoing turmoil of the interrelated bank insolvency and sovereign debt crises that have been riling national currencies. These crises have not ended, so I expect this supply/demand relationship will continue. Therefore, gold will become more highly valued in the months ahead, meaning that its purchasing power will rise.

At some point in the future, which cannot be predicted, gold will become overvalued. Its purchasing power will exceed historical norms. To give but one possible example, maybe a barrel of crude oil will only cost 0.50 goldgrams or less. When that moment arrives, it will be time to reduce your gold holdings to buy undervalued investments or to purchase some consumer goods with your savings, which is the gold you are accumulating now while it remains undervalued. I suspect that we are still many months, if not years, away from that event because gold is far from being overvalued.

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deepcasterDeepcaster (



"...when it comes to debt and to the prospects for future debt, the U.S. is not a 'clean dirty shirt.' The U.S., in fact, is a serial offender, an addict whose habit extends beyond weed or cocaine and who frequently pleasures itself with budgetary crystal meth....


"The International Monetary Fund, the Congressional Budget Office and the Bank of International Settlements compute a 'fiscal gap', which is a deficit that must be closed either with spending cuts, tax hikes or a combinations of both which keeps a country's debt/GDP ratio under control...


"Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow and the dollar would inevitably decline... Bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive within the 'Ring of Fire'."


Bill Gross, Chairman, PIMCO 10/02/2012

It is refreshing to hear a Lionized Establishment Figure such as Bill Gross (whose PIMCO has $1.8 Trillion under Management) make a Public Statement, which approaches the Truth.


While Gross's Statements are True, they do not tell the "Whole Truth", and therein lies Opportunity for Investors.


The Truth is that the "Ring of Fire" is here already and we have been temporarily insulated from it only through a combination of Fed and ECB Interventions (which depress rates in the short-term, but guarantee Galloping Price Inflation in the mid and long-term) and Bogus Official Figures (e.g., Real U.S. CPI is 9.33% per


Regarding Price Inflation the Major cause is the Central Banks/Official Interventions via QE and otherwise. And now QE4 has just been unofficially announced by Charles Evans, Chicago Fed President and voting FOMC Member in 2013. He says The Fed should continue buying (unsterilized!) Treasuries after January when Twist ends. Indeed, "Unsterilized purchases mean that they will surely be Price-Inflationary.


Note 1: The $US dropped nearly 200 basis points at one point in the last two weeks. No surprise since the Fed's U.S. Dollar-Destructive Q.E. to Infinity Action, coupled with the ECB's Similar Action the week before, boosted the Euro vis-�-vis the Dollar, as we earlier forecast. The recent $US bounce does not change its weakening Trend.


This Debauchery of the $US weakens its Purchasing Power and thus increases Burdens on the Agonized Disappearing Middle Class.


The Bernanke claim that buying $40 billion per month in Mortgage Backed Securities would Stimulate the Economy and help the Housing Market is just a Fictitious Cover Story. In fact, it is just another Gift to the Mega-Banks who hold Underwater Paper, and to Wall Street, which proceeded to rally on The Fed-sugared High.


Both the Continuous Commodities Index which show Average Annual Price Inflation of 15% and the Real Inflation Number (9.3% per year from reveal Serious Inflation is with us and it Intensifying.


And Especially Food Price Inflation.


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6 Stats That Expose the Truth About the Global Economy

October 6, 2012

by James Corbett


For years now we've had to listen to the mainstream talking heads telling us about "green shoots" and "jobless recoveries," half-heartedly warning about the "risk" of a "double-dip recession" while noting with relief that the stock markets are doing well. Readers of this publication know better. Behind the sunshine and smiles, we are entering an unprecedented phase of economic history as the largest bubble in the history of the world-the ticking derivatives time bomb-inches closer to a day of reckoning. Sometimes all it takes to put these things in perspective is to look behind the rhetoric at some of the numbers, so this week I present to you 6 statistics that should leave any thinking person concerned about the future...and more motivated than ever to prepare for the collapse of the current financial system.


#1 - Greek and Spanish youth unemployment broke the 50% mark in March


In March of this year, youth unemployment in both Greece and Spain broke the 50% barrier. Not coincidentally, these are two of the most perilously positioned Eurozone countries in the sovereign debt crisis and the two countries that have seen the most violent protests since the Eurozone crisis began.


It has become fashionable in recent months to downplay this figure by pointing out that the unemployment rate is determined by dividing the number of out-of-work workers in the pool (in this case under 25 year olds) by the total pool of workers. But since the total pool of under 25 year olds doesn't include those who are currently in education or training, that means the number of unemployed youth is being measured against a much smaller pool than the overall unemployment rate, which is measured against the pool of all workers. By calculating the unemployment "ratio" (the number of unemployed youth by the total pool of under 25s, whether looking for work or not) one arrives at much more "reasonable" numbers: 19% youth unemployment in Spain and 13% in Greece.


I wouldn't become too smug about these revised ratios, however. No matter how you break it down it means that less than half of the youth in Greece and Spain who are looking for a job can actually get one. I'll repeat that: less than half. That's the type of situation that starts revolutions, especially when it is effecting the youth who are already facing the prospect of a lifetime of debt servitude based on the sins of their political fathers (and mothers).


And it gets worse: Greece and Spain may just be the canaries in the coalmine. A report from the International Labor Organization earlier this year indicates that global youth unemployment has hit 75 million. Unemployment effects youth differently than adults. An adult who faces time out of work between jobs goes through all sorts of financial, personal and professional strains, but for a youth it is even more difficult. Losing out on experience and on-the-job training that generally occurs in the under-25 years make them less employable should the global situation actually improve. In other words, a workforce generation is growing up with a significant and potentially irreversible workforce handicap. It's almost enough to make you want to stay at home. Which brings us to...


#2: 29% of 25 to 34 year olds in America have moved back to their parents' home at some point


According to Pew Research, nearly three in ten Americans under 35 years old have moved back in with mom and dad at some point. While this is common in some parts of the globe, where children generally live with their families until they marry and start their own family (and even afterward), this is an unusual phenomenon in the US. Still, the new research shows that not only is this situation becoming more common as young workers struggle (and fail) to cope with the financial stress of living on their own, it's also becoming more normalized in the culture. Of those polled, only 25% of these returning children think of this situation as a bad thing for their relationship with their parents. It's even been given a name: the boomerang generation, because they return after leaving.


Every generation strives to provide a better life for their children, and for much of the 20th century Americans came to expect that quality of life for each subsequent generation would improve indefinitely. Things have been in decline for the average American family for decades now, however, as the old ideal of stable, lifetime employment, and raising a family on a single income has gradually been eroded. Single-income families are the exception these days, and even by those standards more and more families are finding it increasingly difficult to afford the luxuries they used to take for granted. Now, youth are finding it difficult to even find steady, gainful employment that will allow them to leave the home in the first place. And even when sharing the debt burden of the household, families are still managing to rack up their personal debt...


#3: Household debt is rising again


Either everyone has already forgotten the economic Armageddon that has been kicked down the road by QE1, 2, 3... or people just can't survive within their means anymore, but either way the Fed's Z1 Flow Funds report from last month showed the first quarter of rising household debt since Q1 2008. Total household borrowing was up $157.3 billion in the second quarter of this year, the first rise in 16 quarters. That household debt has been contracting for four years only makes sense given the recession and deep global economic instability we've been experiencing. The first thing people do in times of crisis is cut discretionary spending, tighten the belt, and pay off credit card debt and other outstanding loans. Now, it seems, people have emerged from that tortoise shell to begin borrowing (and spending) again.


The economic talking heads will undoubtedly point to this as a sign of "green shoots" and that the economy is "back on track." After all, this is surely a sign that consumer confidence is back and people have reached a level of stability in their job and income that they feel safe taking on more debt again.


Well, that's what they'd like you to believe, anyway. Another interpretation is that people have tightened the belt as far as it will go and they are now turning to debt to fund the purchases that they can't put off any longer. The other possibility is that people have begun to buy into the talking head talking points that the economy is recovering and are once again feeling that it's safe to live outside their means. After all, the stock markets are doing just fine...


#4 AAPL closes at $666


Apple stock closed at $666 again this Thursday. Make of the numerological significance of that number what you will, but it also happens to be the precise stock price that Apple needed to hit in order to break the record for highest valuation ever. What a remarkable coincidence.


Even more telling than the numerology, however, is that Apple is the world's most valuable corporation. One might very well ask why this is, and one might very well receive a number of answers from the various defenders of Steve Jobs' legacy. But none of them would be logical. Apple had a remarkable run in the last decade, to be sure, coming back from the brink of obscurity to capture a larger percentage of the desktop and laptop computer market than it has ever enjoyed before and trailblazing new markets (iPod, iPad, iPhone, App Store) in the process. The synergistic rollout of these technologies was brilliant in itself, familiarizing even lifelong PC users with the Apple environment and convincing many to make the leap into other Apple products.


But there is almost nothing going in Apple's favor at this point. Whatever edge the company held by being quick out of the gates in the tablet and smartphone markets is being lost as the competition gains ground and picks up steam. This is not aided by lackluster additions to existing product line-ups in recent years (iPad 3, iPhone 4s), and a product rollout that has been an unmitigated disaster (Apple Maps). Even the Mac's old selling point that it was virus-free has been dropped as OS viruses have begun popping up. Apple's entire brand image and selling point has been its drive to emphasize slick design and ease of use, but that has back flipped in recent years and it is now cool to deride the hordes lining up outside of the Apple store for each new product release as vapid trendies who are just acting "cool."


Fitting, then, that this is the flagship corporation of the SS America at this particular time in history. Here we have an economy built on style over substance, sizzle over steak, outsourced Chinese slave labor over American manufacturing, fudged happy numbers over depressing real numbers. It's enough to make you believe that the modern American consumer will fall for anything...


#5 Unemployment just hit 7.8%


Whoopee! Celebration! QE3 is working! According to the latest figures, the U.S. unemployment rate just fell to 7.8%, down from 8.1% the month before. 118,000 jobs were added to the economy in September, beating out analysts' estimate by a full 4,000. This is already being hailed as a major victory for Obama and the Federal Reserve, a sure sign if any were needed that the economy is back on the right track after Bernanke's announcement of QE3 last month.


Unfortunately for those who are already planning their own ticker tape parade for Obama and his team, there's a depressing reason for the drop in the (already fudged) rate: the largest surge in part-timers employed for economic reasons since 2003. One of the many (many, many, many) problems with the government's fudged unemployment number is that it doesn't take into account the quality of the jobs that have been added to the economy. Sadly, part-time positions don't make for a sound economy, and the multi-generational degradation of the labor force from a full-time, lifelong employment model to a temporary or part-time, transient model of constantly changing jobs is a sign of the fundamental rot in the current economic paradigm. The number is not as significant as Team Obama wants you to believe, and coming as it does right before the next election, anyone who does not take the euphoria of the economic talking heads with a hefty pinch of salt is simply not thinking straight.


#6 - The projected shortfall in social security over the next 75 years is $134 trillion


Yes, you read that correctly. That's trillion with a "t."


According to the Washington News Tribune:


The projected shortfall in 2033 is $623 billion, according to the trustees' latest report. It reaches $1 trillion in 2045 and nearly $7 trillion in 2086, the end of a 75-year period used by Social Security's number crunchers because it covers the retirement years of just about everyone working today.


Add up 75 years' worth of shortfalls and you get an astonishing figure: $134 trillion. Adjusted for inflation, that's $30.5 trillion in 2012 dollars, or eight times the size of this year's entire federal budget.


In present value terms, the Social Security Administration says the shortfall is $8.6 trillion. That means the agency would need to invest $8.6 trillion today, and have it pay returns of 2.9 percent above inflation for the next 75 years, to produce enough money to cover the shortfall.


That's the rate of return Social Security expects to get from its trust funds. The problem, of course, is that Social Security doesn't have an extra $8.6 trillion to invest.


Well, duh. You can try to spin this positively: 'It's only $8.6 trillion of today's dollars if invested at 2.9 percent above inflation for 75 years!' But the system is already broke and the only way to get those 8.6 trillion would be to fire up the printing presses and cause the very inflation that one is hoping to out-invest. 'It's only $30.5 trillion in 2012 dollars.' This is the perfect illustration of the never-ending inflationary spiral that kills all long-term savings even in the rosiest government-approved inflation scenarios.


The sad truth is that the system is completely broke, and Romney and Obama arguing over cutting back the deficit by x percent or lowering taxes by y percent isn't going to make any difference at all in that assessment. Those who are in a position to do so are advised to avoid relying on a social security net that almost certainly won't exist in its current form for very much longer and to invest in building up your own inflation-proof supply of bullion and long-term storable foods to prepare for the economic collapse that is still taking place, no matter what spin they try to put on it.

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