Dow Burns And Gold Stocks Rock: The Gold and Silver ‘Buy Signal’ is Engaged

Gold Seek writes 24 disheartening historical ‘facts’ and how we are going down with the ship… with the exception of a couple of saving graces, one of them called SILVER, the other GOLD.

  1. In late 2013, I predicted the Fed would taper its QE program to zero, and the first taper would cause gold to rally, stunning the Western gold community.  I also predicted the taper would turn the US stock market into a “wet noodle”.  That’s what happened.
  2. In 2015, I expect the Fed to hike rates sooner than most analysts expect, and I’m predicting that gold rallies on these rate hikes, and global stock markets take a horrific beating. I expect the stock markets of India and China to recover from that beating, but not the American market.
  3. Despite yesterday’s mini-crash, I don’t think the American stock market is pricing in the reality of the coming rate hikes.
  4. Please click here now. That’s the daily Dow chart, and it’s off to a terrible start this year.
  5. The “January indicator” that I use focuses on the first week of trading during each year. If the Dow ends that first week on the downside, it can indicate the entire year will be negative.
  6. That’s because how the Dow trades during the first week of January is a very good barometer of how institutional money managers are adding or withdrawing risk capital, with a one year outlook. So far, their outlook isvery negative.

READ 7 through 24 including the gold buy signal: click here now

gold-is-ready

Money, Gold, Liberty In 2015 And Beyond

(Gold Silver Worlds)

2014 was quite an eventful year for global markets: Janet Yellen became the new Chairman of the Federal Reserve; we were on the brink of war in Crimea, and Germany won its fourth world cup title. Many countries around the world held elections, the Scotts and the Swiss had referendums and both of them decided to maintain the status quo, whether it was against Scottish independence or the Gold initiative. I wouldn’t describe this year as a tough one for gold, considering that it is ending the year close to where it left off end-2013. While some may perceive this negatively and against the rationale for holding physical gold, I find it more relevant than ever, like I said last year. The main reason why gold did not move against the tide this year is, in my opinion, because appearances have a stronger influence on the minds of the people than the facts presented by reality. The global debt situation is much worse than a few years ago and real economic growth is near zero. Income inequality is rising faster than ever before. The Federal Reserve’s balance sheet expanded from about USD890 billion to more than USD4.5 trillion since end-2007 and the only outcome so far has been an artificial spike in different asset classes and an expansion of the welfare-warfare state. The fact is that a fiat-money system always results in massive centralization, in terms of the economic landscape, “wealth-accumulation” and an ever-expanding state apparatus. The accumulation of debt is part and parcel of this mechanism. No necessary reforms or structural changes have taken place, which would allow a more positive outlook for 2015.

More and more people feel that something is going completely wrong because they understand that it is not possible to fight over-indebtedness by piling up even more and more debt. The majority of the public, I believe, understands they need to sacrifice the present for the future. However, they suppress their conclusion. Most of them want to believe in a miracle and live in the hope that only the others will be affected by the negative consequences of today’s system, which my friend Prof. Dr. Thorsten Polleit calls a system of “collective corruption”. Men refuse to think about the rational outcome of our unsustainable system and prefer to believe in the lie they have been told a hundred times rather than a new truth which is based on the facts. However, we can’t hide from the future or as Herbert Stein used to say: “if something cannot go on forever, it will stop”. The Soviet Union did not collapse because their citizens finally changed their minds and opposed communism; the USSR collapsed because it could no longer be funded.

The only achievement since the global financial crisis is that central banks purchased time financed by “money” that we simply don’t have. According to the Bank of International Settlements, total non-financial debt in advanced economies rose by 37 percentage points to 279% of GDP since the global financial crisis! Even emerging markets, which managed to somehow resist the pileup of debt in the past, have now reached a debt level of 157% of GDP. Instead of cutting the cord and putting an end to this dependence on additional credit, the western economies seek to solve their problems by printing more money and accumulating more debt! Mario Draghi believes that the way out is for the ECB to buy corporate bonds and asset-backed securities amongst other assets, dreaming of increasing the ECB balance sheet by EUR 1 trillion to reach around EUR 3 trillion! Also Japan, which has been in a QE mindset for years plans to address any prospect of a recession with even more asset purchases! How valuable can money be if all central banks just want to print more of it? Money is no longer a property title, instead it became an I-owe-something, the Dollar and every other paper money we hold today are simply IOUs. Due to this debt-based system, we need more and more money so that the system does not collapse, because as we all know, loans need to be repaid with interest. This constant increase in the money supply reduces its purchasing power. As long as governments and central banks can redistribute wealth from the middle class, they will continue to do so – the outcome of which will be impoverishment on a wide scale and the destruction of our society.

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All Debts Will Eventually Be Extinguished

Commodity money, such as gold and silver, is real money. Real money is a medium of exchange that extinguishes debt and other financial obligations.

Credit money, such as bank notes, government notes, gold certificates, checks, and bills of exchange, is not real money. Credit money does not extinguish debt or other financial obligations. It merely discharges the debt or obligation by passing it to another person or entity.

Although checks, bank notes, government notes, and certificates, are used as mediums of exchange, they are not real money themselves. Only real money can extinguish debt. They are promises to pay money. Under today’s monetary system, the issuer has no intentions of keeping that promise. Therefore, under today’s monetary system only national bankruptcy via hyperinflation or repudiation can extinguish debts.

When a person buys groceries, he can pay with fullweight gold coins (assuming the gold standard) or with a check or bank note. If he pays with gold coins, no further obligation exists. The grocer has received something that is no one else’s obligation, gold coins. If the buyer pays with a check or bank notes, the buyer’s obligation to the grocer has been discharged. However, it has not been extinguished. The grocer has received a promise to transfer gold to the grocer. The obligation is not extinguished until the grocer presents the bank notes or check to the bank that issued them, and the bank converts the check or bank notes to gold coins.

Likewise, with debt, a borrower extinguishes the debt when he pays with gold coins. He has paid the lender with money that is no one else’s obligation. If he pays with bank notes or check, he has merely discharged the debt. It has not been extinguished. It has been transferred to the bank. The debt is not extinguished until the lender presents the check or bank notes to the issuing bank, and the bank converts them to gold coins.

If the buyer or borrower uses governmentally issued notes, like U.S. notes, or gold certificates, he has discharged his financial obligation to the grocer or debt to the lender. However, the financial obligation or debt has not been extinguished. It has been passed to the government. The obligation or debt is not extinguished until the government redeems its notes and certificates in gold, that is, commodity money.

In the United States between 1879 and 1933, gold certificates (first issued in 1882), bank notes, and government notes, which were called U.S. notes and nicknamed greenbacks, were redeemable in gold on demand. (U.S. notes were legal-tender; the other two were not.) If a debtor used one of these forms of credit money to pay his debt, he discharged his debt, but he did not extinguish it. If he paid with bank notes, the obligation was transferred to the issuing bank. If he paid with gold certificates or U.S. notes, he transferred the obligation to the U.S. government. The debt was not extinguished until the bank note, certificate, or greenback was converted to gold. (This conversion permanently retired the bank note and gold certificate. However, it did not permanently retire U.S. notes. The Secretary of the Treasury had a statutory obligation to reissue U.S. notes after they were redeemed.)

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Expect Higher Gold Prices In 2015

(David Levenstein) Interestingly, while softer oil prices have usually had a negative impact on gold prices, as it hurt gold’s appeal as a hedge against oil-led inflation, the price of gold has remained firm even though the price of crude oil has slumped to fresh five year lows.

Gold prices have been on an incredible roller-coaster ride over the past couple months, whipsawing like crazy. And contrary to popular main stream propaganda, the price volatility has had had absolutely nothing to do with fundamentals. Prices have been driven down by speculators on Comex who have been able to use huge short positions to short gold futures.

While the downside of their action is creating a distorted and unrealistic price for gold, the lower price is creating a wonderful opportunity to buy.

The prices of Brent crude and West Texas Intermediate have plummeted over the last few months.

Both Brent and WTI tumbled 18% in November as the Organization of Petroleum Exporting Countries decided to maintain its 30 million-barrel-a-day output target. Crude has traded in a bear market since October amid the fastest pace of U.S. production in three decades, rising output from OPEC and signs of weakening global demand.

OPEC, responsible for about 40% of the world’s oil supply, pumped 30.6 million barrels a day in November, above the 30 million target for a sixth month, according to data compiled by Bloomberg

Last Thursday, the price of gold came under some selling pressure once again, when the European Central Bank (ECB) said it wouldn’t consider adding to bullion purchases. However, the price of the yellow metal pared earlier losses as the euro rebounded against the dollar after the ECB chief Mario Draghi said the bank would re-evaluate the case for more monetary stimulus next year.

The ECB announced that it will maintain interest rates at current levels. The central bank cut its 2014 growth forecast for the Eurozone to 0.8% from the 0.9% it was predicting three months ago. The downgrades were sharper for 2015 and 2016. Growth next year is expected to be 1%, down from the earlier forecast of 1.6%, while the 2016 forecast was cut to 1.5% from 1.9%.

The ECB also lowered its inflation target following steep falls in the oil price with the annual rate expected to be just 1.6% even in 2016, still below its target of close to but below 2%. Eurozone inflation is currently just 0.3%.

In the press conference after the announcement, Draghi confirmed that the central bank will not buy gold as part of its asset-backed purchase program. When asked what types of assets the governing council would buy as part of its quantitative easing program, he said that the central bank will consider a package of broad-based asset purchases including sovereign debt but not gold. “We discussed all assets but gold,” he said.

Draghi also emphasized that more time is needed to gauge the effect of prior stimulus and the need for additional easing. He noted that ECB will reassess the policies early next year and “it doesn’t mean at the next meeting”.

In simple terms this means that the ECB will willingly buy toxic assets including Greek bank CDOs, Italian bonds—despite the fact that the EU’s fourth largest economy, was downgraded to just a single notch above junk by S&P on Friday, Spanish condo HELOCs, and Portuguese Used-Car ABS… but absolutely not gold. This is in sharp contrast to what the Chinese and Russians are doing which is buying massive amounts of physical gold.

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Why Debt, Default, and Taxes Are Destructive In The Long Run

(H/T Gold Silver Worlds)

The official US National Debt is about $18,000,000,000,000, or 57 times the current market price of the US gold SUPPOSEDLY stored at Fort Knox, the NY Fed, and elsewhere. With so much paper in the system it is easy to see why the Fed publicly denigrates gold.

In the single year from Sept. 30, 2013 to Sept. 30, 2014, the US official national debt increased by over three times the value of all the gold that the US supposedly owns. The total debt and the increase in that debt is clearly “a problem.”

What about a comparison relevant to you and me?

The per capital national debt for all US citizens is approximately 2,600 hours of work based on the annual average wage. But since only about 100,000,000 Americans are working, that increases the work time to pay off the national debt to about four years.

Repeat: Every employee in the US would have to work about 4 years at the average hourly wage to pay the national debt. It gets worse. The unfunded liabilities of the US government are about 10 times larger (depending on who is counting) and that means every worker would have to labor for 40 years to pay the debt and unfunded liabilities.

debt per capita 1969 2014 economy

 

The above graph of official US national debt divided by population and divided by the average hourly wage shows:

  1. The national debt has been increasing faster than both population growth and hourly wages.
  2. The graph shows the number of hours of work, at the average wage, to pay off the national debt. It has accelerated higher since 9-11.
  3. The 45 year trend is clearly up and accelerating.

 

Observations

  1. The phrase about the inevitability of “death and taxes” should be updated to “debt, death and taxes,” and it will soon become “debt, default, and taxes.” Call it DDT, which is the name for a poison.
  2. National debt has increased exponentially since 1913 at 9.0% per year, since 1971 at 9.2% per year, and since October 1, 2008 at 10.1% per year.
  3. Debt is increasing much more rapidly than wages.
  4. “The Powers That Be” want exponentially increasing debt, otherwise world economies would be run differently.
  5. Clearly the debt will NEVER be paid in 2014 dollars.
  6. The only solution is default, either now or later, either by refusing to pay the debt and/or by inflating the dollar so its value decreases to nearly nothing, and hence the debt is rolled-over and paid with “Zimbabwe” dollars.
  7. Politicians no longer speak about “growing our way out.” They know that growth of that magnitude can not happen.
  8. “The Powers That Be” want to retain power and wealth as long as possible, so they will do whatever they can to keep the debt and currency bubbles inflated.
  9. Potential policy changes to lengthen the time BEFORE inevitable default:
  10. Higher taxes
    • Additional less visible taxes
    • Accelerating devaluation of the dollar and more consumer price inflation
    • Asset confiscations
    • Nationalization of pension funds
    • Required investment in T-Bonds

 

The End Game

  1. The US dollar will eventually purchase much less than it currently does. The devaluation process that has reduced its purchasing power since 1913, every year on average, will continue.
  2. The local currency devaluation process is clearly evident in Japan and will become increasingly evident in Europe and the US.
  3. All unbacked currencies will be devalued and some will collapse before others.
  4. Expect more discussion about gold backed Rubles, Yuan, SDR (IMF Special Drawing Rights) and others. Expect central banker resistance.
  5. Prices for gold, silver, land, diamonds, art, and other real assets will increase substantially in dollar terms as the currency and bond bubbles eventually implode.
  6. Social unrest! The people will be angered by currency collapses and the apparent theft of their savings and pensions. What happens when EBT cards purchase half of what they did in the previous year? The Powers That Be will respond to the social unrest.

Avoid the “poison” of DDT – Debt, Default, and Taxes.

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