The Miles Franklin Newsletter
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From The Desk Of David Schectman
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David's Commentary (In Blue):
Today’s daily is longer than usual but it is full of very important information on gold, silver and American Creek. Be sure and read my interview with Kelvin Burton,
American Creek
Investors Relations.
You have to go all the way back to September 2011 to see gold priced this high.
Most Americans are either unaware that gold has hit a nine-year high, or they simply don’t care. Not as long as the stock market is holding up.
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Gold is only $116 away from its all-time high. Gold is up $415 in the last year. A new high should occur in 6 months or less. And then, gold will then be at its all-time highs in every currency. How high can it go? No way to know, but the following should give you a point of reference. During the 70's bull market, gold went from $35 to $195 in the first phase. That was a 458% increase. The first phase of the current bull market took gold from $252 to $1920, which made for a 661% increase. Using the percent increases in the bull market in the 70s and the 2000s, and using the $1,050 low in 2015 as the starting point of the bull market, gold would rise to $4,800 or $6,930.
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Gold came close to $1800 a few times in 2012, but prices above this level now put it near 9-year highs.
At $1800, gold is now up 18% since the first of the year.
Silver continues to lag, up about 1% on the year, highlighting the catchup that could be breathtaking when it finally happens.
Meanwhile, the S&P 500 remains underwater in 2020.
The wolf is coming, the wolf is coming, the wolf is coming. I know I’ve been wrong for a few years now - make that early - but I can see the silver wolf standing on the front lawn now.
Gold punching through $1,800 should be the wakeup call that announces a bull market in gold and silver is here - end of discussion. Some of you may need to see gold at $1,900 or $2,000 before you join the party. That’s fine. Everyone should be comfortable with their investments. The most important thing in investing is sleep. You have to be able to sleep at night with your investments.
Why is gold topping $1,800 important to silver? Because gold always – always leads silver on the way up. Silver always follows and overtakes gold a short time later. You can do your own research, or just take my word for it. I am trying to save you the time.
No intelligent discussion of silver would omit the tireless commentary from Ted Butler. I don’t know Butler and have never talked to him, but I have subscribed to his newsletter for several years and Ted works closely with and is friends with my buddy Jim Cook. Jim and I are always talking about silver and about Butler.
I am going to give you Ted’s take on silver, followed by an EXCELLENT Greg Hunter interview with Craig Hemke on silver. The information presented by these two viewpoints states the bullish case for silver; nothing more need be said.
A brief overview of the silver market by Ted Butler
The silver market is ready to explode. The pressure is building. The silver price is still down two-thirds from the peak ($50) in 1980 and ($50) 2011. The discrepancy between the price of gold and silver is as distorted as at any point in history. It is clearly demonstrated by the nose-bleed silver/gold ratio of 96 to 1.
In the past several months, over 200 million ounces of physical silver has been deposited into the world’s silver ETFs, primarily SLV. There is no precedent to this, ever. The previous highs were in 2006 when over a 15-month period, 140 million ounces entered the vaults of the newly created SLV. The price of silver doubled. In the fall of 2010 40 million ounces found its way into the SLV vault and the price of silver doubled, rising to $50 an ounce.
So how can the global silver ETFs take in 200 million ounces without the price skyrocketing, like it did in the past? We have experienced a small rise in the price, but silver is still 65% below its previous highs. As the Chinese philosopher Backwoods Jack says, “Sum Ding Wong.”
Silver has to explode. The reasons have never before been this compelling. Who supplied the 200 million ounces that recently entered the world’s ETFs? No one but JPMorgan has that amount of silver. Without any doubt, they have sold and leased a large percentage of this silver into SLV and the other ETFs. If (when) JPMorgan stops supplying the physical silver to the market, silver will take off and I (and Craig Hemke) would not be surprised to see the silver/gold ratio fall from the current level of 96 to 1 down to 60 or 70 to 1.
Conservatively, assuming a gold price of $2,200 and a silver to gold ratio of 70 to 1, the price of silver should quickly rise above $30 an ounce. Gold at $2,500 and a ratio of 60 to 1 yields a silver price of above $40. That is not unrealistic since silver was $50 when gold was $1,900 nine years ago.
Short covering of the 70,000 silver contracts (5,000 oz per contract) will play a major factor in the pending take off of silver. That requires 350 million ounces of silver and the yearly production is somewhere around one billion ounces. Most of it is needed for industrial uses.
In order to cover the gold shorts on Comex, it would only take 25 million ounces to cover and that amount is available. But 350 million ounces of silver is another matter. Where will it come from? Even rapidly rising prices will not do the trick.
The 8 big shorts on Comex are now down nearly $10 billion on their combined gold and silver short positions. They are trapped in a rising market, make that the beginning of an unprecedented bull market. Is it time to pay the piper? It sure looks like it.
JPMorgan Will Stop Shorting Silver
The silver manipulation scheme is hard for most people to understand, so they write it off as another “conspiracy” theory. It is anything but. Former CFTC commissioner Bart Chilton validated the rigged silver market in a recent interview with Chris Markus right before his death on April 28.
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Chilton led the investigation of JPMorgan and told Chris that JPMorgan did in fact manipulate the silver market and he had all the evidence necessary to convict them in a court of law - but the standards of guilt were higher in the commodity laws than in civil laws, so he could not get a conviction. Subsequently the commodity laws were revised and if the evidence he had gathered were to be re-submitted today, they would be found guilty. I bring this up to eliminate all doubt about Ted Butler’s contention that it was in fact JPMorgan who was responsible for the repression of the silver market for the last decade. But that is all about to change. This reason why it is changing is the topic of the Hunter/Hemke interview, below. Read the printed introduction and I suggest you watch the interview. If after watching this if you don’t become a raging bull on silver, I will be surprised.
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Greg Hunter’s USAWatchdog.com
J
P Morgan Will Stop Shorting Silver – Craig Hemke
Financial writer and precious metals expert Craig Hemke has predicted for the last year and a half that “high demand coupled with low supply will unlock the price of precious metals.” Nowhere has that prediction been more on target than in the gold price. This year, it looks like gold prices will continue to climb with the doubling of Fed debt on its balance sheet, and massive stimulus from Congress to fight the virus lockdown. Hemke explains, “A key driver here is the Fed policy that is going to lead to a 1970’s style of stagflation. . . .”
Now come supply shortages in the rigged metals markets and a reason to end short selling by a big bank. Hemke contends, “The abuse of the markets was so extreme that in the first 15 days of March of this year, they did 290 thousand contracts (at 5,000 ounces per contract). That’s 900 metric tonnes this way in just the first 15 days of March. Then, boom, everything collapses. Here comes the Fed with QE (money printing) to infinity. The mints are closed. The refineries are closed. There is no gold anywhere. The spread explodes to $100. There are articles written that say HSBC lost $200 million in a day . . . and massive losses because they got caught with no physical gold. . . . Everybody is showing up now and demanding delivery from COMEX. They are having to fly in metal from everywhere to try to make it look like it’s working. . . . So, now, these banks, like JP Morgan, which were able to control the market by issuing these shorts and calling it a hedge, are now being called to deliver.”
So, demand for gold delivery is exploding, and that is a big reason for the upward price pressure. What about silver? Why is it lagging behind gold? It takes nearly 100 ounces of silver to equal 1 ounce of gold. That ratio is going to start coming down dramatically, and Hemke explains why, “JP Morgan has been accumulating all this silver and shorting against it as a hedge, managing the price and monopolistically controlling it. Now, the COMEX is a delivery vehicle, and people were standing for delivery. JP Morgan was short nearly 6,000 contracts (of silver) on delivery day, and JP Morgan had to deliver (29 million ounces of physical silver). In doing so, they have now reduced their stockpile down to 120 million ounces of physical silver. . . . Now. JP Morgan is left with a dilemma. They can continue to play this game of shorting or hedging . . . and run the risk of losing another 8,000 to 10,000 contracts (at 5,000 ounces per contract) and see that stockpile of physical silver get cut again. Or, they can stand down and stop shorting. Either way, they are in a jam. . . . If they keep shorting while there is increasing demand for delivery, they are going to lose it all, and once they lose it all, they won’t be able to issue anymore contracts. This is going to allow the price (of silver) to go up. If they simply stop shorting, once again, the price of silver goes up. . . . JP Morgan may not have a choice but to stand down. . . . The demand is going to continue to grow. . . . JP Morgan will make $120 million for every $1 silver goes up. . . . I think they have to stop interfering with the market. When JP Morgan stops shorting silver, you are going to get the change to the question of why is silver not going up?”
Hemke says there will come a time in the markets when there will be no sellers of physical gold or silver. Then, Hemke says the price will skyrocket.
Join Greg Hunter of USAWatchdog.com as he goes One-on-One with Craig Hemke of
TFMetalsReport.com
.
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The Second (cultural) Revolution In My Lifetime
The First revolution was in late 60s, when my generation rejected everything our parents told us, but not our countries history. It’s easy to tear things down, but very difficult to figure out what to replace them with. Today is the second revolution. You can characterize it as anti-white, anti-wealth, anti-media, anti-government and anti-police. There is a large segment of our society that rejects our heritage and sees nothing wrong with toppling statues of our military and political heroes. It has gone too far. I mean the mere suggestion of destroying Mt. Rushmore is a joke. The protestors are burning the American Flag, not just the Confederate Flag. They seem to forget that the North went to war to free the slaves. Marches and rioting are commonplace. This goes way, way beyond Black Lives Matter. Unfortunately, the Martin Luther King’s “non-violent” protesting is not in vogue. It’s just the beginning of a long hot summer. I don’t like to think what lies ahead.
What is going to happen after July 31 when the $600 weekly stimulus bonuses disappear. When unemployment benefits run out? When millions of people do not have jobs to return to?
One quarter of all income comes from the government. Who is going to pay for this? You and I will.
Look what is happening to hospitality and to leisure – one third of NY hotels may go bankrupt. They can’t do business and we are looking at another round of Covid-19.
47% of US homeowners struggle with their mortgage payment and many consider selling their home. 9% of all active mortgages are now in forbearance. There are now nearly 5 million homes in forbearance now. This will be worse than the housing crisis in 2008. What will happen when these people have to make up the three missed payments and then make a fourth payment? This is just pushing off the inevitable.
The virus has exposed how broke the government is, how weak the economy is, how reliant on credit the consumer is. This will end badly. Households are massively in debt, corporations are massively in debt, the government is bankrupt, the whole house of cards is coming down.
Two million restaurants, worldwide, are at risk of collapse. We haven’t even seen the fallout yet. Most people refuse to comprehend how bad this is and how much worse it will get when the stimulus checks run out and the forbearance ends.
41% of businesses have permanently closed. There will not be a “V” shaped recovery in spite of what Larry Kudlow says.
Last September the warning signs were there – and the Fed understood how bad the economy was and started injecting hundreds of billions via the repo market. We have had plenty of time to prepare. The economy was faltering nearly a year ago and the virus simply sped the process up. It showed how weak the economy really was.
The lockdown would have been survivable if the economy hadn’t been overextended, and buried in debt. Debt now is dominating all aspects of the US. We live in a culture where people don’t worry about the price, they look at the monthly payment. As long as they can make the payment, pay the interest on the debt, they survive, but when they lose their job or miss a paycheck or two it all comes tumbling down. People are barely hanging on now and it will only get much, much worse.
The entire economy is supported by debt, by borrowing. It will implode. It is not a question of “if” it is a question of “when.” When will the depression begin? It is probably already here, in the beginning stages. 10 million people are now delinquent on their auto payments. The standard of living for the middle class will continue to decay.
Are you going to be surprised when you wake up one morning and the stock market is down thousands of points, when gold is up to $2,000, $3,000 and higher and when silver is blowing past $20, $30, $40 and $50? I won’t. What is surprising is that it hasn’t happened already.
The Fed only has two tools to work with – lower interest rates and print more money. Interest rates are already at zero and in spite of all the trillions injected into the economy, things are not getting better.
We will see a commercial real estate collapse here like we have never experienced. Commercial real estate and housing will be on sale. If you have cash set aside, the bargains will be truly once in a lifetime.
States and municipalities will go broke and their pensions will go down with them.
According to a recent interview with Michael Oliver on
KingWorldNews
:
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The S & P 500 will break down within the next few days, and when it does, it will be quick and it will bottom 100 points either side of 2000 (it’s currently 3170). This will be the breaking point of a 10-11-year bubble. Then there will be a bear market rally in the S&P.
Gold had an up month in June. Gold is having a relative divergence to the S & P. We expect the S & P and the Nikkei markets to crash. Gold is in a bull market, whereas the S & P is experiencing a structural breakdown.
The Fed and the Bank of Japan will create all the stimulus necessary to try and prop the markets back up, but many investors will put their money into gold after the S & P collapse.
We expect the new Fed stimulus to go into commodities and gold, but not back into the stock market. Gold has broken out vs the S & P in the last several months. This will look like the late 1970s which was the onset of an epic gold bull market.
Since Aug 2018 to now, the dollar has traded within a narrow 4% range. There is very little dollar volatility. Trump can’t tell the Fed what to do, but he can tell the Treasury what to do. Trump wants to lower the dollar. Watch the dollar – it could move down strongly and that will have an additional impact on gold.
We now have a monthly, quarterly and annual momentum breakdown in the S & P. There has never been anything like that before. It’s usually just a quarterly breakdown, prior to a major correction. There has never been such wide technical damage to the S& P, including 1929 and 1987. In those instances, the process (crash) was over in a matter of days. We expect a rapidly-unfolding crash, followed by a short-term bear rally, followed by a major crash. That’s when gold becomes a screaming buy and the gold bull market starts in earnest.
Silver will soon break out and soar vs gold. Silver has probed $19 three times and pulled back. Watch that level. When silver hits $19 this time, it should quickly rise to $30.
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This is a stealth gold bull market
Since 2018 gold has outperformed the S & P. Gold is outperforming the bond market and is up in every currency. This is not a new development. Gold has outperformed virtually every currency in 16 of the last 18 years. It’s a stealth bull market. Most people don’t realize it or care about it. The bull market has entered a new stage and the party has just started.
Since 15 August 1971 – the beginning of this new monetary era – the average annual increase in the price of gold in US dollars has been 10.1%. The inflation-adjusted appreciation of gold against the US dollar is 6.1% per year on average.
Since 1999 the dollar is down 83% to gold and the euro is down 84% to gold. Gold is the world’s premiere currency.
Over the past 12 months, gold has reached new all-time highs in almost all currencies, including EUR, JPY, CHF, CNY, AUD, CAD and GBP. In 2019 gold was up 18.9% vs the dollar and it was up 22.7% vs the euro.
In 2019 gold appreciated by an average of 18.3% in all currencies. The average annual performance from 2001 to 2020 is 10.30%. During this period, gold was able – despite significant corrections – to clearly outperform practically every other asset class and, above all, every other currency. Since the beginning of 2020, the performance has been very strong.
New all-time highs will soon be reached in US dollar terms. The gold price – against any currency – is about to enter a golden decade. The purchasing power of EUR, USD, and the rest of the currencies, measured in gold, will continue to fall.
The Covid-19 pandemic is not the black swan.
The reaction of politicians and central banks and the downstream consequences for the real economy, companies, prosperity, society, and financial markets; that is the black swan.
Questions and Answers with American Creek’s Kelvin Burton
When I wrote about American Creek two weeks ago, the price was $0.11 a share. The price quickly rose to $0.27 on July 2, and then backed off to $0.22 today.
DS:
Why has the price pulled back in the past three days?
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KB:
My guess is a combination of profit taking and a WHACK of AMK warrant holders coming to the stark realization that they have until the end of the month to pay for their warrants, and they started dumping large blocks to raise the cash to pay for their $0.08 warrants.
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DS
: What makes the Treaty Creek property so special?
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KB:
Treaty Creek is very unique because it constitutes the northern half of one of the largest geological systems in the world. The southern half of the Sulphurets Hydrothermal System (SHS) represents one of the greatest concentrations of metal values on the planet and includes Pretium’s world class “Brucejack” gold mine and Seabridge’s “KSM” project (the largest undeveloped gold deposit in the world by reserves).
Ken Konkin (V.P. Project Development for our JV partner Tudor Gold), who was responsible for the development of the Brucejack Mine (Pretium Resources) just a few kilometers south of Treaty Creek, is an expert in both large scale systems and geology in the
Golden
Triangle
of British Columbia. He has often spoken of the importance of the “frequency for occurrence”, “frequency for distribution”, and “structural traps” of world class hydrothermal systems that create a predictable “rhythm”.
He’s stated that the SHS is a perfect example and refers to its many deposits as a “string of pearls……just really big pearls!” Below is an image showing existing and potential “pearls” in this system.
(this image does not show all the deposits or the Brucejack mine)
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This string of pearls is within the SHS and share:
- The same bedrock geology (Hazelton volcanic formation)
- The Sulphurets Thrust Fault which is responsible for the known deposits
- The Kyba “Line of Discovery” where most major deposits in the Golden Triangle have been located
- Magnetotelluric and Magnetic geophysical anomalies that have aided in the discovery and development of most of the SHS known reserves & resources
- A rhythm of major deposits approximately every 2.5km running SW to NE
The Kerr, Sulphurets, Mitchell, and Iron Cap deposits are part of the KSM system owned by Seabridge Gold. The Treaty Creek mineral claims boundary is just above the Iron Cap deposit in this image. The Goldstorm (GS) is currently being developed, the PS2 and the GS2 are two other potential deposits.
The GS has a conceptual target of one billion tonnes grading close to 1 g/t gold. The average gold mine in the world produces barely over 1 g/t gold so this is in the right neighborhood for grade. According to a
report on Treaty Creek
from Germany, the GS has potential to hold 22.5 – 32.1 million ounces of gold equivalent
prior to this year’s extensive program
. The geology and geophysics both indicate that the deposit could be considerably larger.
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DS:
You own 20% of the property, is that enough?
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KB:
The Treaty Creek Project is a Joint Venture with Tudor Gold owning 3/5th and acting as operator. American Creek and Teuton Resources each have a 1/5th interest in the project creating a 3:1 ownership relationship between Tudor Gold and American Creek. American Creek and Teuton are both
fully carried
until such time as a Production Notice is issued, at which time they are required to contribute their respective 20% share of development costs. Until such time,
Tudor is required to fund all exploration and development costs
while both American Creek and Teuton have "free rides".
Is 20% enough you ask? Treaty Creek has such great potential that a fully carried 20% of it is far larger than most other companies’ projects and all exploration and development up until the Production Notice stage costs us nothing; so yes, it’s enough. There is also the probability of the project being sold to a producing company.
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DS:
What’s happening this summer on the prospect?
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KB:
A 20,000m diamond drill program has been announced but we believe that will be expanded dramatically very soon. The primary goals of the program are to:
·
Infill drill and expand the volume of the GS zone for a maiden NI 43-101 resource calculation at the end of 2020 or the beginning of 2021
·
Drill below the GS resource calculation (700m) to test the depth of the system. Last year the drill gave out close to 1,200m down and the bit was still in mineralization. Bigger drills are being used this year to test greater depths
·
Test the Perfect Structural Storm (PS2) for mineralization (see map above or
click here
for more information)
·
Metallurgical work and baseline studies (environmental) are also being conducted
The result could be a world-scale project with excellent logistics in a politically safe jurisdiction.
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DS:
You’ve had a pretty good price run-up already, what makes you think it’ll go higher?
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KB:
I think the reason for the run-up has been a combination of the excellent work being done by Konkin and the exposure the project has received. People are starting to get the big picture and realize how rare it is to have this scale of project with excellent logistics in a safe environment. An example of this is a report that just came out on July 8
th
which can be found
by clicking here
.
This is still a little-known story and should the drills continue to hit wide intervals of gold (with copper and silver at depth) the model will be validated, exposure will increase, and the market will view that very positively. American Creek’s shares have recently been consolidating on the market prior to the drill results so I think good assays will be the next catalyst.
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DS:
Are there any big investors or funds buying the Treaty Creek stocks?
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KB:
To this point our market cap has been too small for funds to be involved but that’s changing now. We have a lot of large shareholders; the most vocal one being Eric Sprott who owns just under 10% of American Creek. Eric is the largest external investor of Treaty Creek having invested over $25,000,000 into the JV partners in the last 14 months.
In July 2019, prior to the beginning of the Treaty drill program Eric stated:
“What we’re shooting for is to define a 10 or 20-million-ounce discovery”
Later that year after the program concluded Eric increased the size and confidence stating:
“Treaty Creek has a great shot at having 20 million ounces of gold”
This spring after the drill program started on May 11
th
Eric increased expectations again stating:
“Treaty Creek is a place where we hope to find 10’s of millions of ounces”
It’s clear that Eric’s expectations continue to go up given every single hole drilled on Treaty for the last two years has hit broad bands of mineralization. It’s no wonder he made the statement in July of 2019:
“So that’s the sort of play that I like where gold goes to $1,700 or $2,000 and these plays look so economically viable and the stock goes up so much that the analogy I use is Seabridge Gold back in 2,000. I remember buying it at a dollar…and it went to 35 dollars! That is what we are looking for – a dollar to 35 dollars and will set you up for life!”
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DS:
When do you expect more drilling results?
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KB:
David, I’m hoping results will be out any time now. Given how many holes Tudor is drilling I’m guessing that they will include a number of holes in each release. I expect results to start soon and continue right to the end of the year.
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DS:
Thank you for filling me in on your interesting gold mining company. Any final words?
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KB:
British Columbia’s
Golden
Triangle
(
2 links) is really heating up right now as one of the major gold camps in the world and the SHS is the “Crowning Jewel” of the area. American Creek, along with its partners, are fortunate to possess the north half of it and so far, it’s looking as prominent as the Sothern half and who wouldn’t want to turn the clock back and get in on Pretium or Seabridge during their early stages?
A very rare opportunity exists here and so far, those who have become involved have benefited greatly. For those who want to find out more they can simply click on the link below:
Thanks for your interest David, it was good having this discussion with you.
Kelvin Burton
Investor Relations: American Creek Resources
403-752-4040
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Here is a joint statement from Lagarde and Powell at a secret G7 meeting with all Leaders and Finance Chiefs of the seven nations attending as well as the IMF and BIS:
“The financial system has been on the verge of collapse since September 2019 when we started Repos and QE. And since then it has only got worse. The coronavirus hit us at a time when the banking system was almost down and out.
We had enough problems saving the banks. But now we must save big corporations, small companies, individuals, local municipalities and states, the Federal State and this on top of rescuing a financial system which is deteriorating by the day. The whole system is leaking like a sieve and we are struggling to keep it all afloat.
Fortunately, we have printing presses and that helps to keep it all going but only just. Our big fear is that the market will realize that all the money we are printing is worthless. And it is of course but we can’t tell anyone. But if the world wakes up to this one day soon, the financial system could implode in a matter of days. And we would be totally helpless to stop it………”
EXPONENTIALLY WORSE THAN 2008 – A BLACK HOLE
And this dear readers is where the world stands today. On the verge of an implosion of the whole financial system. Just a small crack could push the whole system into a black hole.
All that is needed is a severe second wave of CV-19 or a bank collapse, triggering an implosion of debt markets and the whole system.
Yes, we know the world was in a similar situation in 2008 but with over $100 trillion more in debt and who knows how many additional $100s of trillions of derivatives plus a world economy disintegrating – it is now exponentially worse from a risk point of view.
We must also remember that bad debts in the financial system are going up by the minute with most borrowers under severe financial pressure. Just look at the chart below how bad debts follow unemployment. The banks haven’t reported this yet but we will see it in the next couple of quarters.
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TELLING THE TRUTH IS A REVOLUTIONARY ACT
So why don’t the Fed and ECB chiefs tell the truth? Well, maybe they are, in their own CB Speak.
ECB President Christine Lagarde said the recovery from the coronavirus pandemic will be “restrained” and will change parts of the economy permanently. And Powell recently said: ”The path ahead is likely to be challenging. Lives and livelihoods have been lost, and uncertainty looms large.”
So “restrained” and “challenging” is as far as they can stretch without panicking the world. They would obviously never warn bank depositors that their money will soon be gone. This is why people must figure it out themselves. But they won’t of course until it is too late.
LESSONS IN RISK
Most people have never had to worry about risk in the financial system since until now they have been saved by the CBs.
With more than 50 years in business you learn a lot of lessons on the way. As a young man, when acquiring my MBA back in 1969 I had to learn everything about Keynesian economics, only understanding much later how wrong it all was.
My first job was in commercial lending in a Swiss Bank. Those were the days when the Swiss banking system was run on conservative principles. That was the perfect training for analyzing and understanding risk and very different from the massive leverage of today with minimal capital backing.
My real grounding in dealing with risk was at Dixons. At the time it was a small listed UK business which we built up to the UK’s leading consumer electronics retailer and a FTSE 100 company. I was first a green 29-year-old Finance Director and a few years later Executive Vice-Chairman. Dixons was founded by a Jewish entrepreneur who was a superb businessman and retailer. It was a steep learning curve. He is now 88 and still as sharp as ever.
One of our principles was to always panic early but in a controlled manner. For example, if there was a substantial downturn in consumer spending, we implemented major cost reductions across the company within a few days. And if we made major acquisitions, we quickly sold off dead or liquid assets to reduce leverage to conservative levels.
By being financially prudent and commercially aggressive, we managed to grow the company fast without taking excessive risks. We survived without pressure both the oil crisis in the early 1970s and the coal miners’ strike which led to having electricity only 3 days a week. The other days we sold televisions with the help of candle lights.
Low leverage and low debt were the key. So, very different to today with massive debts and leverage. And that is why no individual and no company can survive a serious crisis without massive state aid. In recent times, no one has been taught to save or build up a nest egg for a rainy day. When things go well, all the money is spent and when they go badly, you either borrow money or the state has to help. This goes for individuals as well as for big corporations.
DEBTS AND DEFICITS – THE MODERN MANTRA OF FINANCE
With low or zero interest rates and the value of money constantly declining, there is clearly no incentive to save whatsoever. Also, governments and central banks are setting very poor examples.
But how can you expect people to be prudent when their governments and central banks have for decades been running deficits and printing money. Debts and deficits are the mantra of modern finance. But what no one seems to understand is that this mantra has become a chronic disease which is killing the world a lot faster than the coronavirus.
WEIMAR & ZIMBABWE SQUARED IS COMING
The world’s central banks are now in the process of outshining both Weimar and Zimbabwe. Together with governments they have globally printed and borrowed $18 trillion since CV started. And since the Great Financial crisis started in 2006 they have more than doubled global debt from $125 trillion to over $275 trillion but that is just the beginning.
We talk about billions, trillions and quadrillions as if we understood what it means but nobody really does. It is absolutely impossible to fathom what a trillion is. Let’s start by counting to one trillion. It will take you 32,000 years. And then you would have to count very fast, never hesitate nor make a mistake – nor start from the beginning again. Ok, so the $18T just created globally, how long would that take? Almost 600,000 years.
FED & ECB QE HAS ZERO VALUE
So clearly totally unrealistic and impossible. Whenever this magnitude of money has been manufactured before, like Weimar, it has always been totally worthless. And it is this time too!
This magnitude of debt can never be serviced at a market rate. Only at near Zero or negative rates. It can never be repaid with properly earned money. $18T represents 22% of Global GDP. And since almost all countries have deficits today, there is absolutely ZERO chance that this debt will ever be serviced or repaid in future.
Remember that the US has not had a proper budget surplus since 1960. (Please don’t write to me about the Clinton years. They were fake surpluses as debt continued to increase).
Virtually all the money created by the US government and the Fed in the last 20 years is totally worthless. Because any money created at will out of thin air is by definition fake. If all that was required to print the $10s of trillions was to press a button and nothing was produced by way of goods or services, then the money has ZERO value.
I know I keep stressing the previous point over and over again. This is done so that at least a few people can understand what is likely to happen next and therefore prepare themselves and their financial situation.
So why don’t Powell and Lagarde tell the people that central bank actions are destroying the economy and the value of the country’s money.
The dollar has lost 86% in this century and the Euro 82%, measured in real money. Real money is of course gold since it represents constant purchasing power and is the only money which has survived in history.
THE JOURNEY TO ZERO WON’T BE LONG!
MARKETS
Stocks
There is an ominous disconnect between equity values and profits. As the chart below shows, values have doubled since 2012 with profits stagnant 2012-19. Now in 2020, profits are crashing and stocks will follow.
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The Dow correction up finished on May 8 and is now resuming the downtrend. All the V recovery optimists are going to get a real shock. The monthly Dow peaked in January 2020, see chart, and the downtrend was confirmed well before CV started to trouble markets.
I have been saying in the last couple of weeks that a resumption of the stock market downtrend is imminent and it seems clear that imminent is now.
Most market participants will be shocked as stocks around the world crash down below the March lows and long term much, much lower.
Gold & Silver
Many have feared that the precious metals will initially fall with stocks but this seems unlikely to be the case.
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On the contrary, it looks like Gold is now breaking above the important $1,770 level. Since the
Gold Maginot Line
was
broken a year ago at $1,350
,
gold is up over $400 or 30%. The 6-year consolidation since 2013 has built up a lot of energy that will take gold to over $2,000 in the next move.
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There has been a massive fight to hold Silver below the $18 level. It seems the LBMA boys are now losing the fight as silver has gone through the $18 level which it has held below since 2014 with 3 months’ exception in 2016. This Silver Maginot Line is even more significant than the Gold one as it comes from a much lower level of 64% below the $50 peak. Once through, we are likely to see a silver explosion and a sharp fall in the gold/silver ratio.
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Praeterea censeo Carthaginem esse delendam – Cato the Elder
3rd Punic War 149 – 146 BC
“Furthermore, I consider that Carthage must be destroyed”
is what Cato the Elder said at the end of every speech he gave in the Roman Senate prior to the 3
rd
Punic war 149-146 BC. In the end his persistence paid off and Carthage a Phoenician City in North Africa was destroyed.
I learnt this phrase in Latin at school and also about Roman history and it has stuck ever since.
The reason why I mention this is that I, like Cato, normally finish most my articles in the same way, namely that you must hold gold for wealth preservation purposes and not for gains measured in phony paper money which is about to be totally debased.
Hopefully not just my historical understanding of gold but also my passion and persistence will help a few people to avoid ruin in coming years.
P.S. The secret G7 meeting discussed at the beginning of this article obviously never took place. But it should have!
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Bill Murphy, Andy Schectman: July Silver Deliveries Spike
The latest silver delivery data is truly stunning. Possibly even historic.
Between the current COMEX deliveries, as well as the additions into SLV and the silver trusts, the data shows almost 90 million ounces of silver being demanded in just the first three days of July!
To make sense of it all, Bill Murphy of GATA and Andy Schectman of Miles Franklin joined me on the show to talk about the shocking demand figures, and what it means for the price of silver.
So if you want to stay ahead of the Wall Street crowd, click to watch the interview now!
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Private Safe Deposit Boxes
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Unencumbered / Segregated Storage
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About Miles Franklin
Miles Franklin was founded in January, 1990 by David MILES Schectman. David's son, Andy Schectman, our CEO, joined Miles Franklin in 1991. Miles Franklin's primary focus from 1990 through 1998 was the Swiss Annuity and we were one of the two top firms in the industry. In November, 2000, we decided to de-emphasize our focus on off-shore investing and moved primarily into gold and silver, which we felt were about to enter into a long-term bull market cycle. Our timing and our new direction proved to be the right thing to do.
We are rated A+ by the BBB with zero complaints on our record. We are recommended by many prominent newsletter writers including Doug Casey, Jim Sinclair, David Morgan, Future Money Trends and the SGT Report.
For your protection, regardless of where you live, we are licensed, regulated, bonded and background checked per Minnesota State law.
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