Aug 10, 2011

Central Banks losing in the Wars of Currency Interventions

From Trader Dan's Market Views :

It was just last week that we witnessed the Bank of Japan intervene into the Forex markets to derail the Yen's rally back towards the former intervention level. It had completely erased the losses that it suffered after the round of coordinated intervention by the BOJ, the ECB and the Fed back in March of this year. It was evident from their action that the Ministry of Finance was dealing with political pressures from industry leaders whose exports were suffering as a result of the surging yen and were complaining quite vocally about its levels. Out came the intervention gun by the BOJ and down went the Yen.

But look out! The Yen has come back once again and it has only taken it FOUR TRADING SESSIONS to erase all of the losses that the intervention had resulted in. Talk about a gigantic waste of resources by the Central Bank!

The problem is the sheer volumes of liquidity that are tied to carry trades using the Yen as the funding currency. Traders continue to unwind those trades and run from risk with the end result being a repurchasing of the Yen. That buying is overwhelming any efforts by the Japanese monetary authorities to rein in the Yen.

There is now an effort by the SNB (Swiss National Bank) to derail the Swiss Franc, which is also attempting to take the Franc lower as it has been the recipient of huge inflows tied to safe haven flows. I expect that they will meet with the same "success" as has the BOJ.

Based on what I am seeing, the Central Banks have now become victims of their own policies. They created this beast of liquidity in an attempt to preserve the status quo and now that it is surging back towards their own shores, they are powerless to stem its tide.

The Crack in the Ice

From LewRockwell10 August 2011:

Ice skaters who go out onto lakes or large ponds are told from their early years not to skate on thin ice. The sound of cracking ice is a signal to skate toward the shore.

On Friday, August 5, 2011, the world heard the ice crack. Late in the day, Standard & Poor's downgraded American government debt by one point: from AAA to AA+.
The decision of the U.S. Congress the previous Tuesday to raise the debt ceiling by over $2 trillion was a real crack in the ice. Standard & Poor's only made it semi-official. "Yes, the loud noise you heard on Tuesday really was what it sounded like."
That was not all. The European Central Bank on Friday announced that it would hold yet another a weekend meeting to deal with yet another crisis in the bond market for European national government debt. This time debts issued by the governments of Italy and Spain were coming under attack in the bond market. Lenders were demanding higher rates.
The European Central Bank on Sunday announced that it will begin buying bonds issued by the technically insolvent governments of Italy and Spain. In other words, it capitulated. It did the same thing with Greek government debt. By the terms of the Maastricht Treaty and the Lisbon Treaty, it is not allowed to do this. But, hey, you can't make omelets without breaking a few eggs. Or laying them.
The key ingredient of these omelets is fiat money. The ECB will create the money required to buy these bonds. There are a whole lot of bonds to be bought. Italy has about 2 trillion euros worth. Spain has about a trillion.
Italy and Spain are huge debtors. They are not pipsqueak debtors the way Greece is. There is serious money invested in the IOUs of these two PIIGS. The bankers of Europe thought, "No Western nation will ever default." They bought these IOUs with both hands. Now they face losses of 50% or more on these bad investments. The big banks have no intention of taking the famous haircut. Why should they? The ECB is there to bail them out. Bailing out large banks is the #1 task of all central banking. There is no reason for large banks to worry.
The ECB will not have to buy all of this debt. The fact that it stands ready to buy some of it will temporarily keep interest rates on these bonds lower than the 6% they were forced to pay a week ago. But this is merely another case of kicking the can down the famous road to insolvency.
The ECB makes perfunctory protesting noises about its decision. Its lips say "no, no," but its eyes say "yes, yes." The ECB issues statements about its responsibility to keep inflation low. Then it creates digits to buy the bonds of deadbeat nations.
Note: all nations are deadbeats. Some are more deadbeat than others.

In this sense, the ECB is like Germany's Prime Minister Angela Merkel. She, too, makes statements about "no more bailouts." But every time there is a major financial crisis because of a threatened default by a squaling PIIG, she and Sarkhozy and their supporting cast of small government nonentities get together over a weekend and come up with another round of bailouts. I like to think of her preliminary remarks as Merkel's gurgles. Why the gurgling sound? Because she chokes on the words she will soon eat.
Merkel makes gurgling noises to placate German voters. German voters have some vague understanding that they will wind up paying for the mistakes of German bankers, French bankers, and all the other bankers. This is correct. They will.
What German voters do not perceive is that the bailouts were always assumed by bankers. The bankers wisely perceived that they would be bailed out. They lent money to PIIGS. It was such easy money. There was no risk. But, you say, there really was risk. Yes, yes – but not for large bankers. The ECB and the IMF and the other bailout agencies would accept the consequences for the decisions of the bankers.
It's just like the Federal Reserve and the U.S. Treasury in September and October 2008. They bought the largest commercial banks' toxic debt at face value.
What will voters do about all this? Nothing of any consequence. A few voters understand what is going on, but they have no way to protest effectively. Congress goes along with the bailout process. It has no intention of cutting spending. It has no intention of reducing the government's debt. It never has.
German voters have no way to place restraints on the ECB. German central bankers make gurgling noises. They vote no in the ECB's meetings, knowing that their votes are irrelevant to the outcome. They do not have enough votes in the ECB hierarchy to stop the ECB's policy of buying PIIGS bonds. They go through the motions for the sake of the voters back home.
There is only one way out for Germany: to pull out of the European Monetary System. Germany can abandon the euro. The country is in a strong enough economic position to do this. The EMS allows the nations to have their own central banks, just not their own currencies. Germany can secede. But that will take a domestic political reversal of monumental proportions. This is not likely in the near future.
The planners of the New World Order have always planned to use Europe as the first step: the model of all the good things that treaty-based, centrally planned economic integration can achieve. Beginning with Jean Monnet and the American agent, Raymond Fosdick, at the Versailles peace conference in 1919, this has been the plan.
Fosdick gave up in 1920 after the Senate refused to ratify the Versailles Treaty. He returned to the USA, where he became John D. Rockefeller's main lawyer and financial bagman for the next 40 years. But Monnet never stopped lobbying to create the European Union. He achieved his main goal before he died in 1979: treaty-based economic integration. This was a preliminary step to political unification.
The grand experiment is unraveling before our eyes. The New World Order's designers could not create the European New World Order in one step. They knew that. They did it piecemeal, one treaty at a time, for 50 years, beginning with the Treaty of Paris in 1951. This was Monnet's brainchild.Then came a series of treaties signed in Rome.
The problem is this: they could not get the votes to merge the central banks into one. The others still exist as figureheads. But they do exist. The Eurocrats could not get the voters to accept a common fiscal agency that would control the deficits of each nation. So, the system has a soft underbelly: national parliaments that can run up debts, combined with a common central bank whose primary purpose is unofficial, namely, to bail out large banks.

This system is now visibly falling apart. Northern European political leaders call for economic "austerity" – reduced government deficits – for the PIIGS. Ireland has buckled. It has promised to cut its deficit. But it did this only because the political party in power late in 2010 agreed to terms for IMF loans – loans that the party's leaders had denied were necessary a week earlier. The voters had no say. They threw out the majority party a few months later, but by then it was too late.
In response, the Irish Times ran the most accurate obscene mainstreammedia political cartoon I have ever seen. But that was what the protest was limited to: symbolic protests.
Why did Ireland's government buckle? Because it was already on the hook. It had nationalized its banks. It stood behind their debts. Now the banks faced bankruptcy. The Irish Times described the dilemma.

Finance Minister Brian Lenihan said the bailout was necessary because Ireland's banks have become wholly dependent on loans from the European Central Bank and, just like the government, are likely to be frozen out of normal credit markets for at least a year.
He said Ireland's six banks, five of which are already nationalized or part-owned by the state, would be pruned, merged and possibly sold off.
"Because of the huge risks they (Irish banks) took earlier this decade, they became a huge risk not only to this state but to the eurozone as a whole," he said.
Irish banks invested aggressively in runaway property markets at home and abroad. After the 2008 credit crunch sent property prices into freefall, the government tried to save the banks from bankruptcy by insuring all of their borrowings against default. That unprecedented promise – made to retain investor confidence in the country – cannot be kept without a bailout, the government has finally been forced to concede.

Does any of this sound familiar? All over the West, bankers have extended loans to bad risks. It was the fiat-money-fueled property markets, 2001-2007. But now we learn that certain national governments' IOUs are only marginally better than the bad property loans, which have yet to be written down by the banks.

This new risk is far worse for bankers. Why? Because national governments can conceal the bad property loans. They cannot conceal their own looming insolvency. The credit markets keep increasing the interest rate that lenders are willing to accept. The governments must pay these rates, which are eating into their budgets.
The PIIGS' voters can take to the streets to protest budget cuts. But that does not change the fact that private lenders are not going to lend more money at low rates. The protests in fact persuade lenders that a particular PIIGS nation is an even lower credit risk. So, the lenders raise the rate again.
The only ways out are these: (1) balance the budgets, (2) find non-private lenders.
The PIIGS' governments need an excuse to cut welfare spending. When the ECB or the IMF lend money and impose conditions, the politicians can blame these hard-nosed lenders. This strategy did not save the Irish government earlier this year. It fell. But its replacement has meekly abided by the terms of the loans.
The PIIGS can of course take the borrowed money and then renege on the terms. If one majority government refuses, it can be voted out of office. But, as the Irish voters discovered, that did not change anything. The new government is abiding by the terms set by the IMF.
At some point, some PIIGS electorate will toss out the existing government and replace it with a government that will stiff the IMF and ECB. The new government will not cut spending. But then the government's interest rates will rise. The government will then have to decide: (1) pay the rates by cutting welfare spending or (2) default.
There is a third option: pull out of the EMS. Abandon the euro. Put its domestic central bank in charge. Tell it to buy the country's bonds. In other words, the government can inflate. It will default through inflation.

The Eurocrats keep telling us that this will never happen. Of course it will happen. Politicians will heed the desire of domestic voters, who want goodies from the government. The voters will not get goodies; they will get depreciating money. But that has been acceptable to most Western voters ever since the end of World War II.
Yes, German voters are willing to protest against inflation. Germany remains an exporting nation. It is doing well inside the EU. But it has a problem. To keep the system going, it is required to bail out PIIGS through direct government subsidies. It is also required to go along with the ECB when the ECB buys PIIGS bonds by creating new money. Germans may not like the arrangement, but the only way out is to stop the government-to-government bailouts and then pull out of the EMS.
Germany would them have two huge problems. First, its currency would rise in relation to the euro. This would reduce German exports. The export sector's economists (read: shills) would cry for a weaker currency. Export-based special interests are almost always successful politically in trade surplus nations. Mercantilism is still a major political force in nations that are running balance of payments surpluses. "Don't kill the goose that lays the golden eggs!"
The second problem is the squeeze on German banks. These banks have loaned hundreds of billions of euros to PIIGS. They will be repaid, if at all, in euros. But euros in relation to a newly resurrected deutsche mark will be falling in value. Even if the interest payments on the loans still arrive, they will arrive in a depreciating currency. The banks will take their haircuts. They will lend less. Rates will rise. The economy will go into a recession.
The West's voters have voted for the welfare state. A majority of them are addicted to these wealth-transfers. They really do believe that government austerity – putting the state on a fiscal diet – will cause a recession. They are determined to keep the welfare state alive. But it is steadily going bust. Why? Because the welfare state has always relied on the flow of low-rate loans to the government.

Keynesian economists have always rested their entire position on one assumption: "Loans to the national government are safe." This was Keynes' view, stated obscurely in The General Theory of Employment, Interest, and Money (1936).
Here is the Keynesian logic. Lenders are afraid to lend. This cuts consumer spending. The economy stays in recession. This is the lipstick on the Keynesian pig.
You want more? Here's more. Lenders want safety. They are afraid to lend to private borrowers, who may default. They will lend to a national government. The government will then pay for various projects that the free market judged were wasteful and loss-producing. This gets the economy rolling again.
This is conceptually stupid. I assume that you see why. Lenders have to put their investment money somewhere, unless they spend it for consumer goods, which Keynesian economists say is a Very Good Thing. Lenders who have enough money to affect the economy do not have their money in currency under mattresses. They have it in banks or mutual funds. If this money does not go to a government to be spent either on centrally planned projects or to buy votes, it will go to some other investment. This should be obvious to anyone who has the faintest inkling of how to follow the money.
This is why Keynesianism is conceptually stupid. But most Ph.D.-holding economists are self-blinded to such an extent that they cannot understand this. They have not read W. H. Hutt's book, The Theory of Idle Resources(1939).
This crucial assumption – "Government debt is close to risk-free" – is at long last being called into question. It is being called into question by the acts of politicians. They are incapable of getting their national governments' budgets under control.
This is why Keynesian economists are apoplectic over the S&P downgrade. They are also upset that anyone should question the ECB's wisdom in extending a helping hand to Spain and Italy. The Keynesian assumption has always been that lenders should invest money in government bonds. Government bond markets are the foundation of all Keynesian theories of counter-cyclical spending by governments.
We never hear a unified cry from Keynesians in boom times that it is time to cut government spending and start paying off the government's debt. We are told that Keynes called for counter-cyclical policy in boom times, not just bust times. That meant running surpluses to reduce the debt. But we never see quotations from Keynes to this effect. We never see signed statements from Keynesian economists calling for debt reduction.
There is a reason for this. Keynesian economics is welfare state economics. It has always been a cover for wealth-redistribution. Officially, this wealth redistribution has been justified in the name of helping the poor. Operationally, it has always been wealth transfers to very large banks.
Every time there is a financial crisis, the government and the central bank bail out large banks. Every time, Keynesian economists hail this policy during the crisis period. Then, after the dust settles, and the surviving banks are larger than ever before, they bewail the fact that Wall Street was bailed out again.
These people are not slow learners. They are non-learners.

We are witnessing the break-up of the ice pond. The public is skating on the pond. They hear the cracking sounds. A few wise skaters have started heading for the shore. Gold hit $1,750 on Monday in response to Friday's cracking.
Tens of millions of Americans and an equal number of Europeans are going to be trapped when the Great Default comes. Yes, Alan Greenspan has denied that this will ever happen.

"The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default" said Greenspan on NBC's Meet the Press.
Does this reassure you?
August 10, 2011
Gary North [send him mail] is the author of Mises on Money. Visit He is also the author of a free 20-volume series,An Economic Commentary on the Bible.
Copyright © 2011 Gary North

Evidence That Hidden Elements May Have Promoted UK Riots (As the public try to defend themselves with sweeping brushes!)

By Ron Logan
Stafford Scott, Tottenham Community Activist, stated on Sky News states that not only did London Police fail to communicate with peacefully protesting residents to defuse the situation in Tottenham over the killing of Mark Duggan[1], the Police also inexplicably left a number of their vehicles unattended in the area that effectively acted as an open invite for them to be smashed up – as they subsequently were[2].
Note that this is eerily similar to what happened when unattended police-vehicles were left in areas where students were protesting some months ago in London. Leaving unattended police vehicles in areas and situations of such high tension clearly provides temptation for angry crowds to escalate matters from peaceful protest into violence and arson. At the very least, it is a tactically foolish thing for the Police to do. As Stafford Scott states, towards the end of his interview[3], with regard to some of the male protesters that had previously been peaceful:
“…when they saw some Police-Cars, which for some reason were just parked-up unmanned, like leaving a red rag, a red flag to a bull and they just had a go… I think that… if the Police had been more responsive to us as a community we would have gone and it would not have happened…”

Along with the Police shooting of Mark Duggan, widespread eyewitness reports that Police were initially slow and unduly ineffectual in response to riots and that other aspects of Police operations were suspicious, the question needs to be asked: were police-vehicles deliberately left in a vulnerable location in order to incite or inflame an already tense situation? While the majority of Police Officers have to date clearly just been doing their courageous best to respond to difficult situations, there is concern that this cannot be said of some within their ranks and leadership. A full and open examination of the facts needs to therefore occur.
Whatever the case, as Paul Joseph Watson of points out with regard to copy-cat rioters in the UK (as opposed to the legitimate peacful protests of the Duggan family and their supporters in Tottenham) that have been triggered by the Tottenham incidents:
“There can be little doubt that the vast majority of the rioters are products of the country’s broken society, nihilistic youths who care little about political grievances and are primarily focused with exploiting the chaos to steal as much booty as they possibly can while getting off on mindless violence. This behaviour ensures the public will overwhelmingly support whatever measures are proposed to deal with them, even to the point of outright martial law.”
Indeed; it is beyond doubt that the undeniable process of transforming Britain from a state of “policing by popular consent” with “British Bobbies” to one of a militarised police-state has been accelerated and will increasingly snowball. The current state of affairs in the UK will be used by dark forces (wether or not they prove to have been engineered by them) and, to those who understand the rapidly assembling ‘New World Order’, was both predictable and predicted. See, in this respect for example, Paul Joseph Watson’s article entitled “Austerity Fascism Is Coming And It Will Be Brutal” that was written over a year ago:
Malign New World Order globalists will “never waste a crisis” and ‘truthers’ must not waste any time in waking people up to the wider issues and context that youth riots are just one ugly detail of.

[1] See:
Doubts emerge over Duggan shooting as London burns -
Mark Duggan: profile of Tottenham police shooting victim -


Claim: Youths Offered Money To Start Riots


Louis James, 19, who says he has never held a job and learned to read only three years ago, admitted to looting a $195 sweater. Photo by Tom Pilston for the International Herald Tribune (London Riots Put Spotlight on Troubled, Unemployed Youths in Britain) 
The English Riots: Who Benefits?

At we read:

"The riots now spreading through Britain's major urban centers ... may not have been so spontaneous...

"We have seen how social destabilization in the Middle East and North Africa has been driven by an organized storm of Tweeting and other forms of digital networking, mostly in the English language oddly enough, assisted surely by agents provocateurs on the ground.

"Should we dismiss the possibility of something similar in England?"

Canspeccy speculates that elements of the government may have organised the riots in order to advance their agenda.

"What, then, to do? 

"Spark a massive race riot, hold the police back until the thing is blazing across the nation, then use the disaster as the rationale for necessary restraint on immigration, thereby establishing a populist base for the right?" 

Tanks in Glasgow, in 1919, ready to shoot the people. "The seriousness of the government's intent can be gauged from Regulation 965 about how to deal with 'civil unrest': 'It is undesirable that firing should take place over the heads of the rioters or that blank ammunition should be used.'" - BBC NEWS.

The riots give the 'powers that be' a chance to crack down on those who might organise against the wealthy elite.

Max Hastings, a friend of the military, explains the thinking of the rich elite (UK riots 2011: Liberal dogma.):

"An underclass has existed throughout history... 

"Its spasmodic outbreaks of violence, especially in the early 19th century, frightened the ruling classes. 
"Its frustrations and passions were kept at bay by force and draconian legal sanctions."

We can now expect more force and draconian legal sanctions.

We can expect public sympathy to be on the side of law and order.

On 22 July 2011, not far from London, General Petraeus met Brigadier Simon Wolsey, commander of the British Army's 2 (South East) Brigade. Brig Wolsey worked at the Pentagon from 2006 to 2008. (General Petraeus tours Dover war tunnelsAlso on 22 July 2011, Petraeus met US Director of the Office of National Drug Control Policy Barry Richard McCaffrey. Petraeus was also in the UK in March 2011.
The police seemed to let the London riots happen.

'White boys ripped off the shutters, then a group of around eight or nine children went in and stole the day’s takings...

'All the time the police were about 15 yards away, just watching.'

So where WERE the police? Shopkeepers mystified at tactics that left them defenceless

"The American government secretly backed leading figures behind the Egyptian uprising who have been planning 'regime change' for the past three years, The Daily Telegraph has learned."

(America's secret backing for rebel leaders.)

The UK's General Frank Kitson developed the idea of the 'pseudo gang'. (General Frank Kitson: Trail Blazing Fake Terrorism)

The pseudo gang works for the military but pretends to be a bunch of rioters or terrorists.

The idea of the 'pseudo gang' is to attack innocent civilians and then blame the attacks on the people that the military wants to discredit.

1998 - the CIA reportedly wanted regime change. The riots in Jakarta targeted certain Chinese-Indonesians. The riots were designed to discredit the student protestors and the poor. The 'rich corrupt' military were able to remain in power. 
In August 2011 - we have Riots in London and the UK. 

This reminds us of:

May 1998 - when there were Riots in Jakarta, reportedly organised by elements of the military, reportedly trained by the USA.

There may be no strong connection, but there are possible similarities.

White 'rioter' in Hackney, London, 8 August 2011. Part of a psy-op?
In May 1998 it was believed that the economy of Indonesia had been undermined by hidden forces, such as George Soros.

The stock market had plummeted.

Banks had collapsed.

The Jakarta riots were sparked by uniformed men shooting dead four students. 
(On 8th August 2011 we learn that in the London Tottenham riot: the Bullet fired at a police officer 'belonged to the police'. The riots in London started after the shooting of Mark Duggan by the police.) 

CIA boss General David Petraeus was in London in March 2011.
The riots of May 13-14 
On the 13th of May there were reports of rioting in the area around Trisakti University in Jakarta.

President Suharto was attending a conference in Egypt and the military top brass went off to Malang in East Java to attend a ceremony.

(BBC News - London riots: David Cameron on holiday / Tottenham riot: top police officer flew off on holiday.) 

On the 14th of May, serious rioting took place in the Jakarta area.

There were no signs of any uniformed soldiers on the streets.

(London riots 2011: 'lack of police on streets'.)

Over 1,000 people died during these Jakarta riots, most having been burnt in malls and supermarkets but some having been shot or beaten.

British Prime Minister David Cameron welcomed Israeli Prime Minister Benjamin Netanyahu to London on 4 May 2011 
Alleged involvement of the military in planning the riots 
Father Sandyawan Sumardi, a 40-year-old Jesuit priest and son of a police chief, led an independent investigation into the events of May 1998.

As a member of the Team of Volunteers for Humanitarian Causes he interviewed people who had witnessed the alleged involvement of the military in organising the riots and rapes.

(The Riot Pattern in Jakarta and Surroundings. (

A security officer alleged that Kopassus (special forces) officers had ordered the burning down of a bank.
A taxi driver reported hearing a man in a military helicopter encouraging people on the ground to carry out looting.

Shop-owners at a Plaza claimed that, before the riots, military officers tried to extract protection money.

A teenager claimed he and thousands of others had been trained as protesters. 

A street child alleged that Kopassus (US trained special forces) officers ordered him and and his friends to become rioters.

There was a report of soldiers being dressed up as students and then taking part in rioting. 
Eyewitnesses spoke of muscular men with short haircuts arriving in military-style trucks and directing attacks on Chinese homes and businesses.

There were reports of children being encouraged to enter malls and then of the malls being set on fire.

There were allegations that muscular men with short haircuts had gang-raped little Chinese girls and then murdered some of them.
~~David Cameron is to expect regime change? Or increases in the power of the police and military? In Tottenham in London, the local Member of Parliament, David Lammy, has blamed people from outside the area for causing the riots. 
The Daily Mail referred to unconfirmed reports that suggest a group of around 150 youths arrived in the north London suburb of Tottenham from 4 p.m. 

Igor Gois, a Brixton resident and deputy manager at neighbouring Phones4u, said: "The police are saying that it is the youths that are doing this. But it’s not; it’s big men." (Streatham traders speak of riot drama

"Rioters were left virtually unchallenged in several neighborhoods and able to plunder from stores at will or attempt to invade homes." (Britain burns: Riots spread through UK cities)

"This kind of behavior makes the police look like the good guys, which is why agent provocateurs are routinely used to stage such violence at major summits.

"That’s not to say some of the chaos isn’t driven by genuine grievances over police brutality and poverty, but the majority of the violence is being committed by mindless teenage thugs who have let themselves be molded by Britain’s broken society into Clockwork Orange-style droogs." (Prison Planet.)

"Residents questioned why no police officers were available to combat rampant looting as thieves methodically cleared stores...

"The most senior officer in Haringey left to go on holiday just hours before rioting began on Saturday. 
"Detective Chief Superintendent Sandra Looby jetted off to Florida despite warnings the police shooting of Mark Duggan could spark violence...

"In the busy shopping street of Green Street, in Forest Hill, there were reports that 400 young Asian men had chased off up to 150 rioters...

"Residents in Clapham, Croydon, Peckham and Hackney complained at the absence of police officers during the worst confrontations...

"In Clapham, Owen MacCarthy, 28, a bank worker, said: 'We've been here for an hour and half and we haven't seen a single police officer." (Scotland Yard braced for backlash over 'lack of police on streets )


English Immigrant Underclass Riots: Who Benefits

Alan Watt: Revolution, flashmobs, and brain chips. A grim vision of the future: (And you think it’s all just coincidence?)

10 Reasons Why Gold Is The Gut Reaction And Why Silver Is The Smart Decision

From AUGUST 09, 2011
We are at the beginning of a major shift out of paper assets into real assets. Those that are starting to come to this revelation have no real understanding what they are doing when they are buying gold. Sure they might get that it is rare and might remember their grandfather saying buy to gold, but they have not gone through the educational process necessary to truly grasp what they are doing.  When I wanted to get out of paper assets, I bought gold as a gut reaction. The more I learned about silver, the more I realized that silver was the smart decision.
When I first started my awakening process in March of 2005, I studied credit cycles and finally understood that the Federal Reserve is a privately and foreign owned bank. I wanted to get my wealth out of their casino. In fact, I recently warned paper investors that it is insanity to be betting in the paper casino, because the entire system is coming down. (Who Cares About Your Bet,  If The Casino Is Demolished?!) Now that people are starting to see this insanity, they want out. So where do people who have trusted the paper market first go when they have their awakening? Gold. Gold is the largest precious metals market in the world and has the most advertising behind it. People have seen it in movies as pirate treasure and maybe heard it was confiscated may years ago. I think gold so impressive to hold and feel, it is hard not to make it your first purchase. In short, gold is the gut reaction for most paper investors who want out of the casino. I think this is the reason why we see so much activity in gold versus silver right now.
The more I learned about silver, the more I saw that it was the only investment for me and my family. I am more bullish now in 2011, than I was when I bet the house on silver in 2005. When you truly understand the fundamentals behind silver, you will see that it is simply the best investment out there. I challenge anyone to find me a better investment. I love a challenge.
First and foremost the reason for investment into silver is that it is a physical tangible asset. When I say invest in silver, I DO NOT mean anything else but the real stuff in your hand. If you don’t hold it, you don’t own it. Stay away from SLV, unallocated bullion accounts, mining shares, etc. stick to the physical. I would hate for you to be right on silver and wrong on the form of silver.
We are entering a generational shift out of paper assets into real tangible assets. As I have stated many times in the past, the dollar is going to collapse and it basis for the entire world economy. It is a mathematical certainty. This dollar collapse will be the single largest event in human history and will dramatically touch every human being on earth and will leave a scar on generations to come. Yes, it is going to be that big.
When the mathematically inevitable collapse of the dollar happens, all paper assets will be destroyed. This goes for Dollars, Yen, Euro, CDs, Munis, T-Bills, Money Markets, Insurance Policies, Pensions, Privately Owned Businesses, Structured Settlements, Social Security, Dividends, 401ks, IRAs, Stocks, Options, Bonds and even Real Estate. Without a functioning currency and the uncertainty it brings, credit grinds to a halt. Payments grind to a halt. Markets grind to a halt. The world economy grinds to a halt. People panic. This ALWAYS leads to war.
This naturally leads investors to tangible assets like commodities. Commodities are real things we use in our everyday life like pork, cotton, corn, oil and steel. The problem with most commodities is storage. I know for a fact that the two best assets to be in in terms of real inflation adjusted returns will be food and fuel. They are the most essential to humanity and the hardest to live without. I strongly recommend people stocking up on preparations before they buy silver. You will need at the very least 3 months supply of food per person as a buffer for the massive social upheaval we are going to go through with the collapse of the dollar. The problem with investing in most food and fuel is storage issues. Most food and fuel deteriorates and becomes worthless. Also storage can be prohibitive especially if we are talking about some big dollars. I don’t know about you, but I don’t have a grain silo or storage tanks.
In extreme conditions those that invest in food and fuel, put their life at risk. People’s violent response to those moneyed interests that tried to speculate with people’s food during times of crisis is something to consider. In 1565 one of Antwerp’s richest men, Pauwels van Dale, bought large amounts of grain with hopes of driving up the prices. When the starving people found out about the stash, they rioted all over the city. Speculators and the rich were targeted with violence for their arrogance and greed.
Unless you are a farmer or oil baron this usually rules out many commodities for the average investor. This brings us to metals because they don’t deteriorate. For most metals, storage again is a big issue. $8,000 will buy you a ton of copper but just over 4 ounces of gold. This is why precious metals are so sought after, because of their rarity and the ability to store so much wealth in a small space.
One of the biggest reasons why people invest in precious metals is that there is no counter party risk. Its value is derived from its intrinsic value of rarity and potential uses. With precious metals you do not have to worry about someone paying a dividend or earnings in a depression or a currency collapse. In fact the worse things get in the economy, the more people will escape to precious metals and drive up its price.
Once you see that precious metals are the place to be, then you need to choose between the big 4 precious metals; Gold, Silver, Platinum and Palladium. Platinum and Palladium have rarity and industrial use going for them, but they have not ever been used as money in history. With a currency collapse, I want something that will have the most demand to drive up the price the most. I want my metal to have industrial, investment and monetary demand. (Read the 3 Demands Of Silver.)
This leaves us with gold and silver as the only two rational choices for investment in the face of a mathematically inevitable world-wide currency collapse. So let us go through the competitive advantages of silver over gold .
1) Silver the second most versatile commodity, second only to oil. With its growing technological and medical uses, its demand is vital to any recovery we will see. Silver’s unique anti-microbial, reflective and conductive qualities make it a vital element in many high ticket projects. Since it is so vital and used in such small quantities, its price is inelastic. If silver goes to a $1,000 an ounce and Apple Computer needs a 1/10 of an ounce to make their $2,000 computer work at the highest quality, they will simply raise the price $100 to make up the difference.
2) Silver is cheap enough for the common man to buy. With gold at $1755 an ounce it is not really conceivable the average American, much less most people in the world, will ever have enough money to buy one ounce of gold. People are struggling to make mortgage payments, much less buy an ounce of gold. With silver at $38 dollars an ounce, a husband could buy a couple of coins without consulting the wife. If he blew $1,755 on one ounce of gold, he might have some explaining to do. Since silver is relatively cheap, the higher the price of gold goes, the more demand will naturally flow into silver.
3) Gold is treasured, silver is thrown away. Since the dawn of man, gold has been treasured. In more recent times, silver has been trashed as an industrial commodity and not valued as a precious metal. With the rise of technology, silver has been literally thrown away in such small quantities that is may never be recovered. In fact, the USGSsaid that if this current trend continues, silver will be the first element to become extinct on the periodic table.
4) There are no large stock piles of silver left. Over the past decades we have been consuming more silver every year than we mine. This is only possible because we used up all of humanity’s previously mined silver. In 1950, it was estimated that there was 10 billion ounces in major stockpiles, today there are none left. So even though gold is 10 times more rare than silver when mined out of the earth, the fact that gold has been treasured and silver has been trashed, makes the silver that is left much more rare than the 10 to 1 ratio that naturally occurs.
5) The gold to silver ratio is at 1:45. It takes approximately 45 ounces of silver to buy one ounce of gold. If throughout all of history silver has been mined a gold to silver ratio 1:10, how much longer can a 1:45 ratio exist? If silver has been trashed for decades and gold treasured, how much longer can the 1:45 ratio exist? If the amount of dollars invested in gold and silver at Sprott Asset management and GoldMoney is 1:1, how much longer can the 1:45 ratio exist? At some point the market is going to recognize the incredible opportunity. When it does, it will most likely overshoot and could make silver more valuable than gold. So if you really want gold, buy silver. You can buy 45 ounces of silver now and if the ratio falls to a 1:1 ratio you can trade 45 ounces of silver for 45 ounces of gold. (Read the 3 Big Charts I Watch For Silver.)
6) Silver has the largest and most persistent short position in any commodity, ever. The only reason why the 1:45 ration exists is because the banksters sell paper silver into the paper markets to suppress the price of silver to give strength to the dollar and the quadrillion dollar paper empire they rule. Last May, when they crashed the silver market, they sold something like 8 billion ounces of paper silver into the market in 5 days. There is only about 1 billion ounces of silver mined a year globally. This massive naked short will unwind the day that they cannot deliver on the silver they promised. Crash JP Morgan; Buy Silver. (Read Blythe Master’s Rides The Silver Rocket.)
7) The banksters are running out of silver and time.The COMEX registered inventory now stands at 27 million ounces. I knew when the May smack down came that it was all BS. Logic would dictate that if the price of silver dropped that significantly there must be more physical silver in their vaults. When the inventory numbers came out, there was actually less silver. Not only was more silver delivered to buyers, sellers cancelledtheir warrants and shrunk the inventory from the supply side like OPEC does. (Read the11 Mentality Shifts Of Silver Investors.) When this massive fraud is discovered, there will be panic buying as the sharks smell blood in the water.
8) The silver market is so small. With only 27 million ounces in the COMEX, a little over a billion dollars would completely empty that largest stock pile of silver. Last Wednesday the Treasury added $240 billion dollars to our debt in just one day. If you see that quadrillions in paper assets are going to fail and that most commodities are not suitable for investment and how small the silver market is, it does not take a very large stretch of the imagination to think what will happen when people try to get into this market. Since the gold market is so large, I think that is why we see central banks and major institutions are buying gold. If they dumped a billion into silver, they would explode the market. A billion into gold would hardly make a ripple. I believe this is why we have seen gold react, while silver sits.
9) The majority of gold owners are the bankstersIf you look at the largest stockpiles of gold owners it falls mostly on the central banks of the world. The very guys that are destroying the paper markets, are the largest owners of gold. There is no central bank that I know of that even owns an even an ounce of silver. Since silver has been used more times as money throughout history as money than gold, logic would dictate that at some point banks are going to want to own silver.
10) Gold bullion is more reported on than Silver bullion. Gold is reported on twice as much in the media as silver. I would bet if you only looked at major media reporting, Gold is probably reported 100 times more than silver, since silver is almost completely ignored. The only time I have seen silver reported is when we get a major smack down in price and the main stream propagandists strike fear in to their consumer slaves about how scary the silver market is.


SGT Silver Report With Bix Weir- Silver is the Metal That Can Destroy the Entire Monetary System

SGT interviews Bix Weir in his latest "urgent" silver report. 

The main battle right now is in the silver market.
They are doing absolutely everything they can to project to the world that silver is not the place to be, that silver is not a monetary metal, and that silver is not a safe haven.
We know differently, that that is complete bullsh**. 

Silver is the metal that can destroy the entire monetary system.
Taking out JPMorgan would start a crash in the derivatives market that is unrecoverable.
Silver would be trading at $200-$300/oz if it had been allowed to trade freely from May 1st on.