Gold and Silver Poised to Surge on Ticking Debt Bombs By James West | July
Gold and silver are threatening to break new ground driven
by one simple fact: Nearly all wealthy nations are labouring
under one form of debt/monetary inflation issue or another.
Ireland and Greek bonds have now been reduced to junk, Japanese
bonds became safer than Chinese as reports of China’s
massive deficits internally offset the rosy picture supported
by 9.5% performance in the Chinese economy. Italy is looming
large as the next bailout candidate, and the United States
prioritize political brinkmanship over problem solving.
Gold and silver are seeking new highs and threaten to break
out strongly – especially now that the Fed has acknowledged
a willingness to launch QE3.
The ridiculous posturing by Democrats and Republicans in
the U.S. over the imminent rise in so-called borrowing makes
it almost embarrassing to be human. They can’t even
get out of the way of their own political agendas to solve
a problem threatening to make politics obsolete. Certainly,
I’d be embarrassed to be American. But on that point,
I’d be embarrassed to be English, Irish, German, French,
Swiss, Portuguese and especially Greek, Italian or Spanish.
Stand close to any of the Davos men who constitute these
nations’ finance ministers and you are immediately
struck by the impression that you’re in the presence
of the best-dressed con artists walking the globe.
But the creative rhetoric that has resulted in 2 + 2 equalling
–4 since the deficit spending party got underway with
the end of the Bretton Woods Agreement by the hand of Richard
Milhouse Nixon is starting to disintegrate under its own
inertia. The novelty and creativity of the formulas and
structures, and subsequently, new language, required to
continue funelling artificial dollars into broken down debt
vehicles is yet insufficient and the charade is reaching
its unavoidable and imminent end. Is it a coincidence that
the debts, currencies, and economies of the top European,
Asian and North American countries are all accelerating
towards the brick wall of default at the exact same point
in history? I smell a rat, or rather, a whole pack of rats.
I think the ruling class, which is without a shadow of doubt
corrupt beyond redemption, have figured out that if you
bury your theft in a mountain of debt, it will never be
found and you can ride off into the sunset undiscovered.
Its time for the politicos and their brainwashed over-educated
economists to disclose publicly both the amount of taxes
paid on their sources of worldwide income.
But that’s another story. It amazes me, and then
again it doesn’t, that there are no culprits in this
grand global forum of doublespeak. The Greeks are guilty,
but not a single Greek person has been named as responsible
for anything that might constitute a transgression of fiduciary
duty. The American president blames the Republicans, who
blame the democrats. Again, nobody is fingered as the leader
or treasury secretary or central bank chairman who is guilty
of a crime, or even of towering stupidity. Greenpspan’s
taking some heat, but he rode off into the sunset, and so
in his dotage is a safe target. If corporations are the
beard for the unsavoury acts of businessmen, then government
is certainly the place to hide for leaders who seek to enrich
themselves at the expense of the general public.
SELF DELUSION AS DESIRABLE SKILL-SET
It’s true that People tend to embrace the convictions
that serve their circumstantial requirements. A cancer patient
believes unequivocally he will beat the disease. A gambler
believes just as forcefully that he can beat the house.
An athlete believes he will win, and a judge believes he
is qualified to pass judgment and sentence on the lives
of others. In the United States, the President and Congress
believe it is both their right and their obligation to pretend
that the inevitable will only occur according to their political
conditions, and fail to recognize that the inevitable will
happen because its inevitable. Both sides know that there
is absolutely zero chance of a compromise not being reached,
and both sides plan to hold out for their respective demands
until the very last possible second. Obama promises the
Biggest Deal Possible, and Republicans are obliged to proclaim
a Little Tiny Deal.
That means the solution will be the equivalent of little
tiny band-aid on a gaping wound in a rain storm. It might
slow the tide of the larger inevitability – the collapse
of the U.S. dollar and the U.S. financial apparatus –
but only temporarily. And then, maybe not at all. Where
the boundaries of reason have long ago been surpassed by
the astonishing ridiculousness of the economic ruling class,
the average intellect is at a loss to opine where the relentless
plunge into the apparently bottomless abyss of debt might
end. Can we really keep ‘refinancing’ and ‘rolling
over’ and ‘reinsuring’ our way into infinity?
Is the next debt ceiling measured in quadrillions, and then
quintillions, and so on?
At the end of the day, these vast sums being loaned into
existence by the collusional participation of elected officials
and their appointees is a smokescreen for skimming the national
take and paying the minimum tax.
But the scheme has evolved into a scam, and the scam has
gotten so mature, that like any Ponzi scheme it needs to
replace old investors with new ones to keep the balls in
the air. It looks like the principle product of our globalized
pyramid economy – indebtedness – is about to
collapse, because all the participants are maxed out; there
are no new investors to keep the scam going. The central
banks can’t create money fast enough to make even
the interest payments on these colossal debts. We could
theoretically amp up the rate of money issuance, but even
with zero interest rates, that’s too much for the
already over-inflated financial system. The value of national
currencies is in terminal decline relative to real goods,
and we are witnessing the birth of the first global hyperinflation
in history. Which brings us back to the main thrust of this
story, which is that we are on the verge of a major chronic
The acuteness of the self-inflicted austerity measures
that Obama has as his only bargaining chip, versus the depth
of relinquished tax breaks which is the only bargaining
chip of the Republicans, is all that remains to be negotiated
in America. That and the numerical name of the next debt
ceiling. In Europe, the game is slightly different. On multiple
fronts, the banks and the governments are negotiating austerity
measures as if they were carbon credits. And just as carbon
credits are easily counterfeited, or cancelled, or fraudulently
re-sold, the promises will be modified by political expediency,
the CDO spreads and interest rates will be adjusted to suit
the reality required by all the vested interests, and the
numerical names of the next bailouts, puny in comparison
with America’s, established.
CHINA AND JAPAN
The news yesterday that China grew by 9.5% in the second
quarter of 2011 appears to have allayed fears that the Chinese
Tiger was growing a little bit tired and threatening to
lie down for a while. But not before the Chinese bad news
triggered a warning from Moody’s.
According to the Wall Street Journal:
China on Monday failed to sell some of
the 50 billion yuan ($7.73 billion) in local bonds offered
at a regular auction. It was the first time one of these
Ministry of Finance auctions failed to sell out since they
began in 2009. Local governments can’t issue bonds
directly so the ministry auctions the bonds on their behalf.
Ratings firm Moody’s Investors Service warned last
week that local-government debt posed an increased risk
to the central government and the banking system, and
said a National Audit Office estimate putting the debt
at 10.7 trillion yuan understated the actual amount by
some 3.5 trillion yuan.
With Europe squabbling over where to meet
next, and Obama sticking to his guns for concessions on tax
breaks, the bigger picture is looking an awful lot like gold
and silver will be the ultimate beneficiaries of all this
When the bombs go off and the delusion can no longer be
supported, we’ll wake up and understand that defaults
on all fronts have been ongoing for quite some time. Then
the stampede will really begin into gold and silver.