RANTING ANDY – I wasn’t planning to write today, given the early hour of my flight home to Denver. Alas, I love what I do, and was inspired watching the markets during a brief layover in Kansas City. While Europe burns to the ground, the PPT desperately attempts to keep American banks out of the crosshairs (ESPECIALLY Bank of America), and the Cartel equally desperately tries to create an illusion that gold is a “risk on” asset, I’m watching the flow of NEWS behind the drama.
And that news is focused on the imminent collapse of large European banks, with French zombies such as Societe Generale, Bank Paribas, and Credit Agricole front and center due to their inordinate exposure to Greece. Of course, ranking such “exposure” is pure semantics, as thanks to the intertwined world of DERIVATIVES, ALL Western banks are tied to each other, and thus the PIIGS, hogs, and all related swine.
However, the KING SWINE, the HOG TO END ALL HOGS, is not a bank, but a CURRENCY, the “world reserve” U.S. dollar. ALL the financial problems in Greece, France, and EVERYWHERE are rooted in the 1944 Bretton Woods agreement, wherein the world ceded this role to the U.S., and subsequently the 1971 abandonment of the gold standard, when the aforementioned reserve currency lost its last shred of REAL backing. Nary a peep of protest emerged from ANY nation, so NO ONE can claim innocence in the perpetration of this grandest of larcenies, that of unabated, accelerating INFLATION!
In my eyes, these events represent the most cataclysmic financial decisions in human history, compounded further by the rash of horrific deregulatory legislation of the 1990s, culminating in the repeal of the Glass Steagal Act AND creation of the Euro currency in 1999 (amazing how these two events coincided with what is remembered as the PEAK of the global economy, isn’t it?). This witch’s brew of unlimited money-printing authority gave rise to the GREAT CANCER of dominant MONEY CENTER BANKS, which for all intents and purposes have TAKEN OVER WESTERN GOVERNMENTS, raped and pillaged the masses, and put the GLOBAL ECONOMY on the precipice of generational COLLAPSE.
Since 2008, when the damn started to break, the Washington/Wall Street/London AXIS OF EVIL has proposed a series of reactionary, destructive stopgaps designed to buy more time before the ultimate COLLAPSE. Each new measure was based on ADDITIONAL MONEY PRINTING, be it by the Federal Reserve, the U.S. Treasury, the European Central Bank, or new, hybrid money-printing monsters such as the draconian European EFSF (if it in fact gets approved) and even the IMF itself via SDRs.
Unfortunately, none of these measures have helped in the slightest, to the contrary contributing further to inflationary pressures, capital misallocation, and widespread social and political unrest. The Western economic situation is more dire than at ANY TIME IN THE PAST CENTURY, and thanks to the aforementioned DERIVATIVES is now a GLOBAL problem that CANNOT be unwound. Moreover, the “half-life” of new money-printing schemes is decreasing rapidly, essentially reaching EFFECTIVENESS SATURATION similar to the MANIPULATION SATURATION that virtually assures no MAJOR decline in gold will occur.
Remember, it’s all about PERCEPTION and CONFIDENCE, and TPTB will stop at NOTHING to mislead you regarding the direction, and scope, of the crisis. Thus, the need for non-stop high level meetings such as the recent G7 and upcoming G20 summits, utilized solely to concoct new money-printing schemes to build the pyramid higher…. and consequently affect public PERCEPTION.
Which brings me to the point of this RANT, the FINAL BAILOUT.
This week, the “bailout de jour” appears to be from CHINA, of all places. The premise is that China, which has in the past intimated a willingness to buy European sovereign debt, would essentially bail out the PIIGS with its unending supply of DOLLARS. In my view, one could not come up with a more flawed premise if one tried.
Once again, the problem is not LIQUIDITY, it is INSOLVENCY, at both the sovereign level and within private banking operations. In other words, you can buy all the Enron or Fannie Mae stock in the world, but still the company would be bankrupt. Such purchases (of Italian sovereign bonds, for example), will NOT inspire institutions to do the same, and will NOT improve Italy’s economy, debts, or deficits in the slightest way. All that can be accomplished is a temporary stay of execution, based principally on CONFIDENCE, and as noted above, the half-life of such activities is approaching ZERO.
If the Chinese proceed with this course of action, they would ONLY do so to BUY THEMSELVES TIME to purchase as many REAL ASSETS OF VALUE as possible with their remaining currency reserves. In other words, the Chinese KNOW they cannot spend even a FRACTION of their $3.2 trillion of DOLLARS before their value dramatically collapses, so they will do ANYTHING possible to buy themselves time to maximize this effort.
In other words, if purchasing $500 billion of WORTHLESS PIIGS bonds buys them time to buy $200 billion of VALUABLE gold, oil, and farmland before inflation commences, they’ll be happy to make that trade. Likewise, they’d be happy to lose $1 TRILLION buying WORTHLESS PIIGS bonds if the “borrowed time” they receive as payment enables the purchase of $300 billion of REAL ASSETS.
The above numbers I chose are not arbitrary, by the way. I am trying to demonstrate the TREND of DIMINISING RETURNS from such actions; in other words, purchasing $1 of WORTHLESS Italian bonds will NOT give China the ability to buy $1 of VALUABLE assets, and the more Italian bonds they buy, the less opportunity they will obtain to acquire ITEMS OF REAL VALUE.
Given that China is the ONLY nation on earth with large enough currency reserves to impact the European bond market AND both the ability and willingness to sustain massive bond losses, its capital can be appropriately described as the FINAL BAILOUT. Such brazen action is doomed to fail conceptually, but from a practical standpoint may be viewed by China’s government as a necessary evil, the best possible alternative for maximizing the value of its soon to be devalued currency reserves.
Readers, PAY NO ATTENTION to the cacophony of babel coming from the towers of Western power. They are only sirens aiming to seduce you from the last of your savings, the last of your earnings power, and the last of your dignity.
Remember, any opportunity the Chinese create to buy GOLD, SILVER, and ITEMS OF REAL VALUE at “discount prices” is YOUR OPPORTUNITY AS WELL. The global economy is a giant PONZI SCHEME requiring additional capital to breathe, and if Chinese currency reserves are the LAST AVAILABLE CAPITAL, it will only provide the Western world with its DYING BREATH.
PROTECT YOURSELF, and do it NOW, as I assure you 2012 will not be as “fun” as 2011.