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"Extend & Pretend"
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"SULTANS OF SWAP"
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ACT I
Sultans of Swap: Smoking Guns!

 

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EURO EXPERIMENT: German Steel or Schmucks?

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"INNOVATION"
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INNOVATION: America has a Structural Problem!

 

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PRESERVE & PROTECT:  The Jaws of Death

 

 

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Saturday
December 29th
2012

 

 

SPECIAL GUEST HOST:Ty Andros , President, Traderview, Author & Publisher ofTedbits Web Site & Newsletter

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with Ty Andros

34 Minutes, 20 Slides

As a regular MACRO ANALYTICS Co-Host, Ty has recorded over 20 session in 2012 each averaging close to 30 slides for over 600 slides and 10 hours of viewing. Selecting the highlights is a daunting task. Distilling it down, there are some central messages that are worth taking the time to reinforce.

ALL OF THE FOLLOWING ARE EXPLORED

SOUND MONEY

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved”       Ludwig von Mises

FALSE GROWTH

Government Political Gaming of the Economic Numbers
Flawed GDP & Growth

Uni-Directional Inflation

Hedonics
Substitution
Imputation

GROWTH OF LEVERAGE, MISPRICING & MALINVESTMENT

REGULATORY COMPLEXITY & HOW WE HAVE WRITTEN RECESSION INTO LAW.

INCREASING DOMINATION OF CRONY CAPITALISM

 

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Saturday
December 22nd
2012

 

 

SPECIAL GUEST HOST: CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com

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with Charles Hugh Smith

25 Minutes, 29 Slides

THE FOLLOWING ARE EXPLORED

  • Rising SYSTEMIC FRAGILITY is increasing the odds of an “unexpected” breakdown.
    • it is now reaching a "Threshold of Vulnerability".

  • The FED LOSSES POLITICAL CAPITAL in 2013.
    • We are witnessing a reduced impact of each QE version,
    • Expect Hope to Turn to Fear when this occurs.
  • ECONOMIC STAGNATION and PERMANENT ADOLESCENCE
    • Using the Japanese Model, diminishing opportunities are resulting in new youth behavior.
  • Probabilities of a STOCK MARKET DECLINE increase.
    • Revisitng the Coppock Killer Curve.
    • The debate about recession or no recession is meaningless; incomes are declining for most households and corporate profits will take a hit as the global slowdown increases and the US dollar rises.
  • The VELOCITY OF MONEY dooms the Fed’s liquidity/stimulus policies.
    • People either are afraid to invest, don't see any viable investments or it is FEAR and a growing Crisis of Trust.
    • The Fed has done its best for four years to push investors into risk assets (by lowering yields on safe savings to near-zero) and to push households to borrow and spend more. The fundamental failure of their policies is that all the liquidity is simply now becoming “dead money.”
  • INCOME is the foundation of real economic growth. It is declining in real terms.
    • Nominally income appears to have grown 24% since 2000. Adjusted for inflation, it has declined by almost 10%.
    • However, the Middle Class have seen their income decline by MORE than 10%
  • SMALL BUSINESS—the Engine of Growth—is in a Long Term Structural Decline.
    • Uncertainty, higher taxes and regulatory fees/costs have eroded the incentives to risk capital and the time to start and expanding a small business.

 

 

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Saturday
JANUARY 1st
2013

 

 

SPECIAL GUEST HOST: JOHN RUBINO, Author & Publisher of DollarCollapse.com

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with John Rubino

33 Minutes,31 Slides

As a regular MACRO ANALYTICS Co-Host, John Rubino has recorded over 22 session in 2012, each averaging close to 30 slides for over 600 slides and 8-10 hours of viewing.

ALL OF THE FOLLOWING ARE EXPLORED

It all starts in 1971 when the US cut the last remaining link between the dollar and Gold resulting in effectively an unlimited credit card for the US government. it meant for the government it could buy what it wanted without prioritizing. It could build a military budget bigger than the next 17 military budgets combined and now costing $1T/year. It meant it could promise an entitlement / welfare state that costs another $1T/year. It meant it could promote a consumer culture that glorified "buying now and paying later". The US quickly became the world's biggest debtor nation.

THE RESULT is the US has had four straight years of $1T deficit. Debt that was 1.5X GDP in 1980 is now 3.5 X. The average family of four now officially owes $700K of US government debt and if calculated properly is closer to $2M/family. The US Debt is now so large that there is no painless way of returning to sound financial footing.

THE RESULT is the unintended consequences of a growing police state and the government becoming more oppressive and authoritarian to protect 'our birthright' and protect the elites. Americans are becoming less and less free, less and less rich - at an accelerating rate.

THE RESULT is a Global Imbalance where other nations have become creditor nations which they likely weren't prepared for. Consequentially it has lead to governments trying to exercise more control as the complexity of globalization has caused increasing numbers of coordination problems. Global systems are fragile, untested and not robust and now leaves the world exposed to any shock quickly unraveling the financial and economic systems.

DERIVATIVES

The lynch pin may be derivatives. They have grown since the financial crisis. Complex systems says you must look at the $640 Trillion notional value not the 'net'. A mere 2-4% adjustment could cause a collateral adjustment that the world is incapable of adjusting to.

2013 IS CLEAR - The Central Banks are going to print "like crazy!"

 

 

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Saturday
December 29th
2012

 

 

SPECIAL GUEST HOST:Ty Andros , President, Traderview, Author & Publisher ofTedbits Web Site & Newsletter

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with Ty Andros

34 Minutes, 20 Slides

As a regular MACRO ANALYTICS Co-Host, Ty has recorded over 20 session in 2012 each averaging close to 30 slides for over 600 slides and 10 hours of viewing. Selecting the highlights is a daunting task. Distilling it down, there are some central messages that are worth taking the time to reinforce.

ALL OF THE FOLLOWING ARE EXPLORED

SOUND MONEY

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved”       Ludwig von Mises

FALSE GROWTH

Government Political Gaming of the Economic Numbers
Flawed GDP & Growth

Uni-Directional Inflation

Hedonics
Substitution
Imputation

GROWTH OF LEVERAGE, MISPRICING & MALINVESTMENT

REGULATORY COMPLEXITY & HOW WE HAVE WRITTEN RECESSION INTO LAW.

INCREASING DOMINATION OF CRONY CAPITALISM

 

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Saturday
December 22nd
2012

 

 

SPECIAL GUEST HOST: CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com

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with Charles Hugh Smith

23 Minutes, 33 Slides

As a regular MACRO ANALYTICS Co-Host, Charles Hugh Smith has recorded over 20 session in 2012, each averaging close to 30 slides for over 600 slides and 8-10 hours of viewing. Selecting the highlights is a daunting task. Distilling it down, there are some central messages that are worth taking the time to reinforce.

ALL OF THE FOLLOWING ARE EXPLORED

It starts with LIVING WITHIN OUR MEANS.

The Critical Importance of SOUND MONEY

“It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically, it belongs in the same class with political constitutions and bills of rights.”

The Maintenance of Money as a STORE OF VALUE

The MORAL DECAY that begins to happen when we veer from these previous tenets

The inevitable and UNAVOIDABLE conclusions it leads to

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved”       Ludwig von Mises

FINANCIALIZATION
GENERATIONAL CYCLES

LESSON OF HISTORY

A great civilization is not conquered from without, until it has destroyed itself from within. The essential causes of Rome's decline lay in her people, her morals, her class struggle, her failing trade, her bureaucratic despotism, her stifling taxes, her consuming wars."
- Will Durant, The Story Of Civilization III, Epilogue, 1944
          

INEPTOCRACY: "A system of government where the least capable to lead are elected by the least capable of producing, and where the members of society least likely to sustain themselves or succeed, are rewarded with goods and services paid for by the confiscated wealth of a diminishing numbers of producers”.

The inevitable resulting ROADMAP

DOOMED MIDDLE CLASS  - Determines the stage of advancement and rate of destruction


CRISIS CONTINUUM

 

 

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Tuesday
December 18th
2012

Why Things Are FALLING APART

and What We Can Do About It

 

 

 

 

SPECIAL GUEST HOST: CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com

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Why Things Are FALLING APART

.... and What We Can Do about It

23 Minutes, 15 Slides

To understand the reasons why our financial system, our economy and our present policies are unsustainable, we need to come to grips with two simple truths. First, the economy and government are an interconnected system. As such the party attempting to steer it does not have controlling power over it. The second fact is that “faster, better, cheaper” always wins, replacing the inefficient and unsustainable. This is the reality within which the system operates.

The present foundation of the system, and our economy, is Financialization.This is not by design but rather by Darwinian evolution. It has unfortunately, become the basic engine of consumer growth through its' leveraging of collateral into debt and phantom assets, such as derivatives and bubble valuations.

The limiting fact to this system is that ever-rising debt and leverage is unsustainable, once household assets and incomes stop rising.

Uncontrolled Financialization & unsound money, without historic exception, consistently leads to:

  1. Malinvestment in the Private sector - In the private sector cheap money will naturally flow into high-risk, low-return investments. This leads to “McMansions in the Middle of Nowhere
  2. Crony Capitalism in the Public sector - In the public sector, crony capitalism secures low risk, high-return investments. This leads to “Bridges to Nowhere.”
The system in its present form has become too complex, fragile and insufficiently robust, that it is realistically unsustainable and un-governable. The unsustainable will collapse and be replaced by an arrangement that is sustainable. Creative destruction and “faster, better, cheaper” is the only sustainable system; the alternative is to cling to failed models until the system collapses.

"Any intelligent fool can make things bigger and more complex... It takes a touch of genius and a lot of courage to move in the opposite direction." (Albert Einstein)

Additionally, our economy and state are unsustainable for converging and disruptive systemic reasons, that go beyond the financial:  

  1. Demographics—our aging populace and the impossible entitlements promises made
  2. Decline of Paid Work—automation and the Web are destroying more jobs than they create
  3. Diminishing Returns of Centralization—the more power the State grabs, the more broken the system becomes
  4. EROEI (energy returned on energy invested): energy may be abundant but expensive
  5. Healthcare in Crisis—our health declines as we spend 2X more per capita than our competitors
  6. The End of Consumerist Growth—if debt and income aren’t growing, neither can consumption
  7. Globalization—the genii cannot be put back in the bottle

What We Can Do about It

“There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. For the reformer has enemies in all those who profit by the old order, and only lukewarm defenders in all those who would profit by the new order, this lukewarmness arising partly from fear of their adversaries… and partly from the incredulity of mankind, who do not truly believe in anything new until they have had actual experience  of it.” (Machiavelli, 1532)

The better choice is to embrace technological and social innovations and “faster, better, cheaper.”, since it eventually wins, regardless of our preferences.

This means GLOBALLY accepting and INNOVATIVELY moving RAPIDLY towards a DATA System:

    D- Decentralized

    A- Adaptive

    T- Transparent

    A- Accountable

  We don’t get to choose!

Hear Charles Hugh Smith explain this in his own words.

 
 

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Saturday
December 15th
2012

MISERY SPREAD WIDELY

2 Part Series

 

Part A

Tuesday 12-11-12

Part B

Saturday 12-15-12

SPECIAL GUEST HOST:Ty Andros , President, Traderview, Author & Publisher ofTedbits Web Site & Newsletter

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MISERY SPREAD WIDELY

The 'something for nothing' mentality is now firmly in charge in the developed economies. As the G7 economies cascade lower under their past, present and future entitlement & politically connected reward policies, misery is now being spread widely! Misery being spread widely is the product of socialism, as real growth disappears and money printed out of thin air fills in for the lack of real income growth. All of this is paid for by the money you earn and store your wealth in, buying less and less, while your balance in the bank stays the same. The attacks on wealth and job creation are set to accelerate as politicians loot and plunder the private sectors to pay the unpayable promises and support those that don’t produce, by dis-incenting and enslaving those that do, as effectively a penalty for leading a prudent and productive lifestyle. 

The cynical would argue that the goal is not to spur economic growth and job creation but instead is intended to foment economic collapse, grow government dependence, gather power as the man-made disaster unfolds, take freedoms and redistribute what wealth is left to the special interests in charge. This may very well be true but it could also be a matter of human nature and the generational re-learning of what role a government must be restricted to playing.

"A great civilization is not conquered from without, until it has destroyed itself from within. The essential causes of Rome's decline lay in her people, her morals, her class struggle, her failing trade, her bureaucratic despotism, her stifling taxes, her consuming wars."  – Will Durant, The Story Of Civilization III, Epilogue, 1944 

Recent Hurricane Sandy exposed once again the governments inability to execute even its most basic mandate - to serve the people. Grief stricken Americans heard plenty of platitudes by well meaning politicians, but the follow through was as usual found wanting by the destitute. The bureaucracy that the politicians supposedly run, with expanding central planning and control, simply couldn't deliver on its most basic responsibilities. The politicians focused on political goals of power and the redistribution of wealth through taxation, regulation and crony capitalism only add to the growing frustrations with the incompetence, inefficiency and shear neglect of the government. The bureaucrats have consistently failed the people and with their failure so will the healthcare, energy industry and financial systems.  They have failed with the post office, social security, the public schools, medicare, medicaid, energy policy and everything else they have taken charge of in a supposed attempt to serve the people! Every generation learns these simple truths about governments and central planning but always fall into the trap of expecting and relying on government versus themselves.The reality is people will sell their freedoms for what they perceive to be safety and security. Predictably and consistently they end up with neither safety not security.

Many have learned through experience that socialism is best defined as "Misery Spread Widely".

Margaret Thatcher in the depths of pulling the UK out of its economic misery pointed out: "Socialism is about spending other peoples money, until there is none left to spend".

Slowing Credit, Capex and Corporate Industrial Production are only three of the 'canaries in the goal mine' that point out that the current bull market in government regulations and uncertainty is stymieing growth, innovation and risk taking. By avoiding and effectively "papering over pain" with unsound money and a litany of transfer payments, it doesn't allow nor force required societal change. It may 'kick the can down the road' by 'extending and pretending' but it only delays the inevitable. A degree of pain is needed to keep a society both healthy & vibrant. Without it you remove motivation and instill complacency, reduced risk taking and Misery Spread Widely.

PART A

 

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PART B

 

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Saturday
December 8st
2012

SPECIAL INTERVIEW with Kerry Lutz

FINANCIAL SURVIVAL NETWORK

 

 

 

SPECIAL INTERVIEW: Gordon T Long on the FINANCIAL SURVIVAL NETWORK

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Tuesday
December 4th
2012

FISCAL CLIFF & CONSTITUTION IN CRISIS

 

 

 

 

SPECIAL GUEST HOST: CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com

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The FISCAL CLIFF &

CONSTITUTION IN CRISIS

29 Minutes, 39 Slides

The Political Foundation of the status quo in America is based on a Grand Bargain of Complicity between the top 25% who pay approximately 90% of the taxes, and the bottom 50% who draw on the benefits that come from government. James Madison in the "Federalist Papers" outlined this complicity in the "Tyranny of the Majority". What is becoming painfully evident is that the political elite in America have falsely over-promised on the entitlements that can be delivered, which is now surfacing in the political turmoil of the Fiscal Cliff negotiations and has the potential to quickly lead towards a constitutional crisis.

Meanwhile the very top 1% of Americans, that pay 25% of the taxes and control most of the productive wealth in the nation, are securing and exercising increasing powers within the government, through what is becoming increasingly identified as 'Crony Capitalism" and "Corporatocracy". Thomas Jefferson also warned us about this potential constitutionally destabilizing influence which could emerge within the structure of the 'separation of powers'.

Out of a population of 315 million, presently only 115 million Americans have full time, non-government funded jobs. This is the same as 12 years ago and before an additional 33 million students, immigrants, single parents of others attempted to enter the workforce. It is now fracturing the social compact and the revealing the delusion of the American dream being available to all who are willing to work for it. There is no work, and certainly insufficient work which pays a wage which will support what is expected as a middle class standard of living.

This Grand Bargain is now rapidly fraying as 75 million baly boomers begin retiring and find the promises made to everyone cannot possibly be met. As the Fiscal Cliff crisis is blatantly bringing to the public's attention, for those who can read between the carefully crafted lines, funding for Social Security, Medicare/Medicaid, National Security and Interest on the debt is consuming more than can be realistically raised through taxation.

To collect enough tax revenue to avoid going deeper into debt would require over $8 trillion in tax collections annually. Expropriating the entire income of the top 25% of households that pay almost 90% of the tax and all corporate taxes would only bring in $6.7 trillion.

“The actual liabilities of the federal government—including Social Security, Medicare, and federal employees' future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion”

Chris Cox and Bill Archer, Former Congressmen - WSJ 11-26-12

Claims on welfare and disability programs are skyrocketing at the same time that the demographics of an aging populace are causing 10,000 people a day to enter Social Security and Medicare, the two costliest government programs. Meanwhile, the upper-middle class that pays most of the taxes has been slammed with lower income and a devastating drop in their housing-based net worth. Compounding this is the fact that the disillusioned wealthy have slowed dramatically their invested CAPEX (Capital Expenditures) in productive assets in the US.

This above confluence and much more discussed in the video, indicates that is is leading to a Constitutional Crisis by the end of the decade.

This is the fifth in the Macro Analytic video series entitled "Constitution in Peril".

 

 

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Saturday
December 1st
2012

AN UNGOVERNABLE DEMOCRACY

 

 

SPECIAL GUEST HOST: JOHN RUBINO, Author & Publisher of DollarCollapse.com

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AN UNGOVERNABLE DEMOCRACY

29 Minutes, 39 Slides

There are five distinct stages in the Life Cycle of Sovereign Nations. These Life Cycles map to generational cycles and Long Cycles such as the Kondratieff. Since these cycles are fundamentally behavioral shifts, they take the nations economic and consequentially its political process with it. Democracies become exposed and borderline ungovernable in Stage V. This is a result of the electorate's expectations, entitlements and James Madison's "Complicity from the Tyranny of the Majority", as outlined in the "Federalist Papers".

STAGE V

After bubbles burst and when deleveraging occur, private debt growth, private sector spending, asset values and net worth decline in a self-reinforcing negative cycle. To compensate, government debt growth, government deficits and central bank “printing” of money typically increase. In this way, their central banks and central governments cut real interest rates and increase nominal GDP growth so that it is comfortably above nominal interest rates in order to ease debt burdens. As a result of these low real interest rates, weak currencies and poor economic conditions, their debt and equity assets are poor performing and increasingly these countries have to compete with less expensive countries that are in the earlier stages of development. Their currencies depreciate and they like it. As an extension of these economic and financial trends, countries in this stage see their power in the world decline.

ACCEPTING STAGE V

Success breeds complacency and complacency breeds leverage Fiat currency enables a late stage country to delay the realization that it is no longer rich, but not avoid it.  The developed and energing nations are in obviously different positions and consequentially their behavioural traits and priorotoes are different. Accepting the realities of Stage V is still to come for the developed world, and when it does it will be sudden and shocking to most people -- and to the financial markets.  The Stage I, II and III countries remain dependent on the late-stage countries, which will make the Stage IV & V descent into poverty painful for all involved. 

THE END GAME

Because governments are borrowing aggressively to offset declining private sector leverage, the focus of the next crisis will be sovereign debt/currencies rather than housing or the stock market.  In a period of major Global Imabalances, which the world presently faces, this will make democratical policy setting extremely difficult and in fact will show democracies to be borderline UNGOVERNABLE. In cases of grossly distorted expectations, such as the US, it will be found to be UNGOVERNABLE.

This above confluence and much more discussed in the video, indicates that it is leading to a Constitutional Crisis in many developed democratic countriesby the end of the decade.

This is the fourth in the Macro Analytic video series entitled "Constitution in Peril"

 

 

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Tuesday
November 27th
2012

CURRENCY WARS: Gold Now in Play!

 

 

SPECIAL GUEST HOST: JOHN RUBINO, Author & Publisher of DollarCollapse.com

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CURRENCY WARS: Gold Now in Play!

29 Minutes, 39 Slides

In a follow-on to the highly popular video entitled: "CURRENCY WARS: The Failing Petro$$ Strategy", Gordon T Long and John Rubino pursue the key strategy elements by shifting focus from black gold to the shiny metal and historic reserve currency. Gold has always played a central role in Currency Wars as THE universally accepted form of 'money'. Today with China and the emerging economies acquiring gold as a strategic component of their currency reserve holdings, we are witnessing a major departure from the central banks selling and leasing of sovereign gold holdings, witnessed from the 90's until the 2008 financial crisis.

In a paper entitled " Sultans of Swap: Gold Swap Signals the Roadmap Ahead" , GordonTLong.com spelled out in 2010 how an obscure item unearthed in the back of a 216 page document, released by an equally obscure organization, signaled the shift. Thrust into the unwanted glare of the spotlight, the little publicized Bank of International Settlements (BIS) was discovered to have accepted 349 metric tons of gold in a $14B swap. It signaled that gold was being used as collateral and would continue to be as a result the post financial crisis collateral contagion associated with the deleveraging of the $67 Trillion global shadow banking system. It wasn't hard to see then where gold prices and accumulation was headed. Recent events in China now forewarn where we are headed next as physical gold is now "in play" as part of the final end game of the US dollar as the global reserve currency.

The London-based World Gold Council said earlier this month that sovereign nations bought 254.2 tons in the first half of 2012 and may add close to 500 tons for the year as a whole.  Sovereigns purchased 456 tons in 2011. However, the current Chinese run-rate of accumulation is now just shy of 1,000 tons per year (350 tons from Domestic production, 550 from Hong Kong and a private acquisition of North Korea Gold reserves), is certainly within the realm of possibilities of China being the second largest holder of gold in the world, surpassing Germany's 3,395 tons and second only to the US. This assumes the US' unaudited holdings are still there, and the actual title is clear without liens and contingencies. Indications are that a gold backed Remimbi could be in our future.

Recently the German high court were so concerned of the viability of the never previously audited German gold holdings (held primarily at the New York Federal Reserve), that they demanded the holdings be audited. Similar to demands to audit the US Federal Reserve this is not being allowed to occur. Why?

All indications are that the US Reserve Currency status is seriously exposed and with it the need for the trillions of US dollars currently held by foreigners. In 1999 the foreign holding of US dollars was 71.2% and had fallen to 62.1% by 2010. In only a couple of years since US dollar reserves have fallen to 58%. If global growth slow,s and these holding level drop even another 5%, then the impact of returning US dollars IOU for claims are simply staggering. Potentially, hyperinflation with a capital "H" could unfold.

Gordon & John lay out the exposures of a combined failing Petro$$ strategy and the shift in central bank gold accumulation, in easy to understand scenarios with supporting graphics. Listeners are cautioned, this is not for the faint of heart.

This is part of a multi-series on Currency Wars

available at PRESENTATION LIBRARY

 

 

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