Whats so hard to Believe?

Why is it that the huge majority of Americans have absolutely no idea whats looming ahead, and what is actually going on? Is it because they dont know any better, or because they follow blindly what they hear on tv, or maybe because they just dont ever change the channel from sportscenter? Whatever the reason is, its hard for me to wrap my head around.....

Perhaps it has to do with what science deems the 'normalcy bias'. This title refers to a state of mind that most people naturally enter when facing disaster. It causes them to underestimate both the possibility of a disaster occurring and the possible effects of the disaster. I think it also might have to do with a sense of arrogance that tends to surround us and our nation. We have this mindset that the rest of the world needs us and depends on us so its to all of their best advantage to make sure nothing bad happens here, as it will most likely have negative effects on them as well. We have this 'it cant happen here' kind of attitude which makes us extremely vulnerable. The remainder of the delusional state can be accounted for by a serious lack of economic and financial understanding which some how the Board of Education doesnt feel is a worthy teaching, so people just absorb what they hear, from a young age, on tv and from their friends and family. This is also the reason that the rich get richer, the poor get poorer, and the middle class struggles with debt.

BUT....... for those who are prepared these times of great crisis and upheaval will be also times of great opportunity. The world has seen this many times before, yet never on such a large scale. If you simply look back in history at all the times these same events have played out you can see the outcomes. In order to survive financially and physically you must be prepared, you must protect yourself. A few weeks ago the northeast was hit by Hurricane Sandy and all of the water, batteries, candles, jugs and pails, bread, and other necessities were cleaned off the shelves. So what will happen when a world-wide currency crisis occurs? do you think the stores will remain open and full of food and water? even if they did would they except your money if it were worthless? These are all scenarios that are not only possible but, at this point, almost guaranteed. What will you do when your savings accounts and retirement funds cant buy you anything? or even prior to that what if you cant withdraw them from your bank? Sounds crazy huh? well all of these events have occurred all over the world time and time again, most recently in Greece, Ireland and Spain; but also in Germany in the 1920's, Zimbabwe, twice during the French revolution, a couple times in England, Japan, Russia, Turkey, even here during the civil war, and countless other nations dating back to the ancient Greeks and Romans.
Do you not think the Romans were a high and mighty civilization? Well the downfall of the roman empire can be partly blamed on a currency collapse. If the currency of a nation, or in this case many nations, begins a freefall to worthlessness what do you think the people of that nation will all be trying to do simultaneously? Thats right, they will be trying to convert their cash and savings accounts into some sort of tangible asset, whether it be wheat, or cattle or water, or gold, or silver, etc. because at least the value of the money will remain in tact although in a different form. The cattle can then be traded for bread and water or gold and silver. But all commodities are not created equal, you see most commodities are consumables like wheat and water and beef, there are only a couple of commodities that we can see throughout 5000 years of history have fit the bill as money. The attributes that make them suitable for money are that they are a medium of exchange, a unit of account, they are portable, durable, divisible, fungible, and they are a store of value. The only two commodities that have been used consistently throughout history as money are Gold and Silver, so if you wish to protect your purchasing power you should at this time be converting your savings and retirement funds into precious metals; as the masses begin to hysterically pile into them down the road you will not only protect your purchasing power but you will magnify it, and then later you can trade accordingly for whatever you might need.

The FHA, whats the plan?

...and the winner of our next huge bailout is..... The FHA!
Lets ask ourselves for a second HOW our broke government is going to bail out the FHA?
Thats absolutely right, their going to use tax payer money to do it. Their going to use our hard earned tax payer money to bail out a Federal agency that somehow couldnt figure out that a few billion dollars wasnt enough to cover the losses on $1.1Trillion of insured mortgages.
The real underlying question here should be why the hell is the government insuring mortgages?
Their creating a false sense of security which props up prices that would otherwise continue to fall. People who shouldnt be purchasing homes are able to do it with almost no money down, so ofcourse when they lose their job or things get tight the easiest thing to do is walk away from it, they have nothing to lose.
Well in the end it just means the printing press will continue to run and the savings of the middle class will be quietly swept away. If your not converting your savings and retirement funds to precious metals then you'll have no one else to blame when they dissappear.

This is usually when the rug gets pulled out from underneath us......
Its sad that so many have no idea whats going on. Anyway todays not the day to worry about it, Happy Thanksgiving!

Shed a little light on Gold: The Remonetization

This video does a great job at explaining the basic structure of the worlds major banks.

The real topic of discussion in this post will be Tier 1 Capital. First and foremost, what is Tier 1 Capital and what is its purpose?

The 1st Tier of capital in the major banking industry (banks typically valued at $50Billion or more) is esentially the beating heart of the bank itself. It is composed of assets that are regarded as having a zero percent risk weight. Meaning that they are of no liability, and can be counted on no matter what the economic landscape. The purpose of these capital reserves are to protect the bank from possible collapse during times of great distress, like the large financial collapse of 2007 and 2008 where we saw many large institutions come under serious pressure do to over leveraging and inadequate capital reserves.

Now that we have defined Tier 1 capital and we understand its purpose lets ask ourselves... what should qualify as a zero risk asset?

Typically the banks own shares of common stock and retained earnings are the heavy hitters. They account for a good portion of the reserve capital. Also allowed into this select category are government guaranteed debt instruments like treasury bonds, and possibly common shares of other institutions. When you think about the term "zero risk" some of these assets simply dont seem to fit the bill, especially under current keynesian monetary policies. With governments around the world expanding their currency supplies at alarming rates it seems negligent to assume that bonds, with such small yields, would be viewed as a "safe haven" asset class as their returns are mostly below the rate of inflation. Anyone that can perform basic mathematics can see that most of these governments have very little to no chance of repaying their debts without first inflating their currency supply to make their payments bearable. So the options for these treasury holders are limited, esentially, to either being repayed with devalued currency (at a loss), or not being repayed at all; hardly what i would call a "zero risk" asset.
On the other hand you have an asset like Gold which has proven over nearly 5000 years of history that it is the ultimate in stability. It has no counterparty risk, it cannot be manipulated or reproduced and most importantly it tends to outperform all other asset classes in times of great inflation, deflation, and distress because of its "zero risk", "safe haven" properties. Gold seems to fit all of the requirements for tier 1 capital and yet it is viewed, in the banking industry, as unequal to currencies and government debt. In fact, within Basel II standards, it remains in the 3rd tier of capital which is home to the most risky assets.

So why isnt gold used, in the world wide banking system, as tier 1 capital if it is exactly what they need in times like these?

This is a great question and the answer is fairly obvious once revealed.
There has actually been talk within the banking industry about the possible shift of gold to a tier 1 asset. You see, banks would actually benefit from the change, as the Basel Committee on Banking Supervision (BCBS) is forcing them to increase their percentage of tier 1 capital starting January 1, 2013 to create more stability in wake of the 2008 crisis. Having other options would allow them to more easily fill the added requirements.
The reason that its so difficult for the committee to allow gold into the tier 1 class is that it would seriously undermine the governments ability to sell their debts. As mentioned earlier, anyone with a calculator can figure out that the bonds have negative returns while gold is only increasing in value with every dollar, euro, yen, etc printed. The banks would without doubt begin to diversify more of their holdings out of bonds and currencies and into gold, so the governments really won't take a change like that sitting down. It may be forced upon them though as gold continues to incrimentally enter the system from the peripherals.
Central Banks have become net gold buyers for the first time in years, and that really makes a bold statement. In the eastern hemisphere we're even seeing the chinese government encouraging its citizens to purchase metals. Many nations are beginning to diversify more and more of their holdings out of dollars and into commodities, as well as creating trade agreements which do not involve converting currency into dollars for purchases. We've seen the acceptance of gold to settle debts on many occasions and its becoming more obvious that people dont want to continue holding and accepting currencies that are being continually debased. So we can see that people are starting to understand the situation more fully as the problems only seem to compound and the fundamentals for precious metals continue to improve. Gold will ultimately move back towards the center of the financial system where it belongs, whether its voluntary or forced doesnt seem to matter.

John Embry: Why Gold and Silver are Important To Own

John Embry and James Turk

RT Interview with John Butler

Great interview with John Butler, founder of Amphora Capital. He's a very knowledgeable person.

Peter Schiff: The Real Fiscal Cliff

Prudential has a Great Point!

Prudential's Silitch today said that with bond yields so low a loss of investor interest could be a real possibility. More importantly he noted something I've believed for a while now and that i first heard from Peter Schiff; if interest rates are for any reason forced upward, whether in an effort to curb inflation or something else, the prices of real estate could take a major hit.
You see the fair market value on a piece of property consists of two major parts, the actual property value and then the amount of the interest on the loan. So say that the average single family home is worth $250,000; that is what people are willing to pay for that piece of property. That number is the total loan amount which is the price of the home plus the interest. Now if interest rates suddenly climbed from near zero to 5% or 10% the price that someone is willing to pay for that house will not necessarily change. Which means that the interest portion of the loan has increased so the value of the home must theoretically decrease to compensate.

Total Loan Amount = Interest + Home Price

Another thing to note is that even if property does begin to rise in price, it may be falling in value.
Price is a unit of measure using the US Dollar, while Value is measured against other assets.
The price may rise simply because they are printing so much currency, but when you measure the gains against those of gold or cotton or oil, etc you will find the actual value of the asset.

Japan follows suit

On September 19th the Bank of Japan announced that it will be following the lead of the ECB and the FED. You can see the "race to debase" as its being called. Governments around the world are all printing money in an effort stimulate their economies and increase growth. Having a currency of less value also means that your exports are more affordable to other nations with more valuable currency, but for those nation with more valued currency exports are more difficult to move out the door. So when some countries are beginning to devalue their currencies at a rapid pace, it forces others to print and devalue as well in an effort to keep competitive in the export markets.
What the governments dont understand about Keynesian style economics is that it never works. If you look back in history at every instance of this type of monetary behavior, they all end very badly.

Wait for QE4, its only a matter of time

Chairman Ben Bernanke of the Federal Reserve announced yesterday September 13th that the FED would put into action an open-ended plan to purchase $40 Billion dollars of Mortgage Backed Securities every month. Thats about $500 Billion a year. They will also hold interest rates at near zero until at least mid 2015.
What a shock! Just like I predicted.

Between the FED and the Government they've created such a situation where there is no easy way out. Theres only two real options; either they are to incompetent to realize that their "solutions" are only increasing the underlying problems, or they know and are just trying to hide the truth for as long as possible. Either way its not good. The only way we'll see a real recovery is they stop intervening and just let markets find their equilibrium. We have a very harsh reality to face, that is true, but the sooner we face it the sooner we can begin with a fresh slate and correct the real problems. The perverbial can is just being kicked further and further down the road with the government bailouts and the banking bailouts and QE1,2,3,4; but no matter how long the road stretches, theres a cliff at the end of it.

The government is in dire straits. They have no money and continue to fall farther and farther into debt with every day. but instead of making cut backs like a normal business, they continue to borrow and grow the government with more tax programs and bailouts and stimulus and wars. Ofcourse wall street is happy because the stock markets keep floating higher on the constant wave of money coming from Ben at the FED. But what the average Joe doesnt realize is that while their mutual fund moves up a couple points and their housing prices seem to regain a foothold its only because the FED is diluting the currency with Trillions of dollars. So their savings and retirement funds are being swept away.

Analogy:

If Ford Motors produces only one of a new model vehicle its going to be worth a lot. But if Ford produces 1 Trillion of the same model, you couldnt give one away. They'd be worthless because everyone would have a hundred of them in their back yard. Well its the same thing with Dollars. Right now having $50,000 is great, but when all those fresh trillions hit the markets that $50,000 wont buy a stamp. Thats what QE is doing to the public savings.

A Conspiracy of the Rich?

What is the number one reason that the rich get richer, the poor get poorer, and the middle class struggles with debt?

Its because financial education takes place in the home.
Parents pass down their understandings and financial habits to their children. Its funny how such an important part of our society is completely neglected in the public school system. Wouldn't a person of any occupation benefit from the knowledge of how to properly invest and ultimately create personal wealth? (my definition of wealth being that yearly passive income derived from investment is greater than yearly living expenses). Ofcourse it would be their own decision whether or not to follow through and adopt the principles learned. Wouldn't financial literacy on an individual level tend to produce a more wealthy and prosperous nation as a whole? Hence the riches of Babylon. Like in the story of Babylon it seems that our people have lost touch with the knowledge and labors that once created such an imperial state.

Would those people in position of power knowingly deprive others of such necessities?

It is hard to argue otherwise.
In 1902 John D. Rockefeller, one of the wealthiest buisness men on earth, with the combined efforts of some of America's wealthiest and most influential figures, founded the General Education Board. Donations from the Board helped to spawn the first widespread highschool systems for the southern states, and also to create higher education institutions across the nation. They also contributed large sums to medical and agricultural institutions and education in those fields. There are many who believe that the intentions of the board were to direct the education of America's youth rather than increase it. A paragraph from the book "The Creature from Jekyll Island" by G. Edward Griffin puts it well....

"The purpose of the foundation (the General Education Board) was to use the power of money, not to raise the level of education in America, as was widely believed at the time, but to influence the direction of that education... The object was to use the classroom to teach attitudes that encourage people to be passive and submissive to their rulers. The goal was-and is-to create citizens who were educated enough for productive work under supervision but not enough to question authority or seek to rise above their class. True education was to be restricted to the sons and daughters of the elite. For the rest,, it would be better to productive skilled workers with no particular aspirations other than to enjoy life."

Also, an excerpt from a letter written by the General Education Board....

"In our dreams, we have limitless resources and the people yield themselves with perfect docility to our molding hands. The present education conventions fade from their minds, and unhampered by tradition, we work our own good will upon a grateful and responsive rural folk. We shall not try to make these people or any of their children into philosophers or men of learning, or men of science. We have not to raise up from among them authors, editors, poets or men of letters. We shall not search for embryo great artists, painters, musicians nor lawyers, doctors, preachers, politicians, statesmen, of whom we have an ample supply…The task we set before ourselves is very simple as well as a very beautiful one, to train these people as we find them to a perfectly ideal life just where they are. So we will organize our children and teach them to do in a perfect way the things their fathers and mothers are doing in an imperfect way, in the homes, in the shops and on the farm."

Apparently the education and thought process that seperate the poor and middle classes from the upper class are strictly on a need-to-know basis.

Mike Maloney explains it all...

The Miracle of Fractional Reserve Banking

In the US we use a system called fractional reserve banking. The average reserve rate is about 10%, so based on this figure when you deposit money into your bank they are allowed to retain 10% of that money and lend the other 90% to someone who wants a loan. So you never actually have the amount of money in your account that it says you do, though you can withdraw it at any time; they'll simply steal it from someone else's account. By these standards every dollar deposited has the ability to create 10 dollars. Say you deposit $100 into your checking account. The bank will keep $10 and lend out $90 to someone else, but you will still have your $100, so now there is $190 in existence. Then that person deposits the $90 and their bank lends out $81, so now there is $271 in existence. Do you see where this is headed?

Now, imagine the newly created Trillions of dollars falling down into the hands of the public and the banking system; being magnified by 5 to 10 times. That is how the savings of millions will be destroyed over the next few years. But Bernanke and other Central Bankers will continue with unlimited Bond-buying because they have absolutely no choice. They would rather kick the can down the road than face the music.

Facts about the Federal Reserve

This is a picture of the United States Federal Reserve Bank. The US Federal Reserve Bank (FED) is actually not a government entity. It is a private Corporation with share holders who are paid by law 6% dividends per year. It is owned by the richest and most powerful banks and people in the world. It has been given, by congress, the authority to create US currency out of thin air and thus control the flow of capital and rates of interest in the nation. The Federal Reserve has a zero balance in its check book. It has no "reserves" of any kind. So it is not Federal and it has no Reserves. Heres how it all works... The United States has what we call a Treasury, every country has some sort of institution just like it though they are called by different names. The Treasury controls the finances for the nation. They give the government the money they need to fund the different sectors like the military, congress or any government sponsored programs, etc. Think of our country as a business; we produce things, and purchase things and invest in things, and the overall goal is to turn a profit at the end of each year. As citizens we all work our jobs and own our property and we pay taxes on those things to the government every year. the IRS monitors all of these things to ensure we're paying properly. So those taxes are given back to the Treasury so they may be lent back out accordingly. Because we, as a nation, are producing a deficit every year we have no money to fund the government sectors and programs necessary to keep our country operating. So thats when the Treasury turns to the Federal Reserve and says "we need money to keep things afloat or we'll go bankrupt". So the Treasury produces an IOU called a Bond that promises to pay back the borrowed amount plus interest over a 30 year period and gives it to the FED. The FED then writes the Treasury a check, from their zero balance checking account, for the amount of the IOU and hands it over. The Treasury then prints that money and puts it into circulation, this is called "Quantitative Easing". It took 200 years to go from the first US Dollar printed to $825 Billion in existance. Then the crisis of 2008 occurred and it took about 2 years to go from that $825 Billion to $2.4 Trillion, thats an expansion of nearly 3 times. And there are another estimated 3 or $4 Trillion created that were not reported. Heres a chart of the reported Currency supply courtesy of GOLDSILVER.com

This chart depicts what is called the "base money" supply, or M1. Inflation is properly defined as the expansion of the currency supply, and rising prices are just the symptom of the actual monetary inflation. There is always a lag in time between the inflation of the currency supply and the rises prices felt by consumers, so it is possible to look into the future in this way by studying the charts. Perhaps now you can better understand the severity of the previous news headline i posted about.

ECB plans Unlimited Bond-Buying

Mario Draghi from the European Central Bank announced on September the 5th that the new plan to help the economic woes in Europe is the purchase an unlimited amount of Bonds and soverign debt. What this means is that the ECB will print an unlimited amount of money until things get better. This will dilute and destroy the wealth of all the people who have savings in the Euro and transfer the wealth to the holders of real assets like land, real estate, commodities, and ofcourse precious metals. You can expect a similar statement to be released by the Federal Reserve probably within the next few weeks, but certainly by years end. Bernanke will have to do it in a more round-a-bout way though, because a bold statement like that from the US will send massive shockwaves throughout the market. So what he'll probably say is something like "well, if we keep the purchase amount open-ended it will allow us to react more quickly and efficiently to the nations economic needs." but what he's really doing is setting it up so that once that initial announcement is made they wont have to tell us everytime they purchase bonds.