Category: Weekly Articles 2012

My Most Popular Post of 2012: You Know You Are a Conspiracy Theorist If…

While Piers Morgan’s interview with Jesse Ventura brought the most visitors to my site for any single post, the most read post I did all year from all sources was You Know You Are a Conspiracy Theorist If…

The post was read 71,382 times on Zerohedge alone and just missed the site’s Top 25 Posts for 2012 List.

So…in case you missed it the first time, here it is!

You Know You Are a Conspiracy Theorist If…

You are capable of critical thinking.

You distrust mainstream media.

You like nature.

You think it’s a good idea to spend the Friday after Thanksgiving with your family rather than camping outside Best Buy to get a cheap plasma television made in China.

You think it’s a little strange that WTC building 7 came down at free fall speed on 9/11 yet it was never hit by a plane.

You think that drones in America might not be for Al Qaeda.

You would like to be able to get on a plane without having to engage in a mandatory radiation bath and digital strip search.

You have read a book in the past year.

You think you have the right to protest.

You think the War on Terror is a scam.

You think the War on Drugs is a scam.

You think the anger directed at America from the Middle East could possibly be related to our foreign policy rather than hating how amazingly free we are.

You think the Republicans and Democrats are exactly the same on the important issues affecting our country.

You think believing in The Constitution does not constitute a terrorist act.

You have heard of the Bill of Rights and can even name what some of them are.

You question whether the government loves you.

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How to Spot a Hypocrite in the Gun Debate and Other Reflections on Newtown

Our government is the potent, the omnipresent teacher. For good or for ill, it teaches the whole people by its example. Crime is contagious. If the government becomes a law-breaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy.

– Justice Louis D. Brandeis

How to Spot a Hypocrite in the Gun Debate and Other Reflections on Newtown
For those of you that follow me on twitter, some of the statements and themes you will read in this article will sound familiar.  What happened on December 14, 2012 was obviously a horrific tragedy that my simple mind can’t possibly wrap itself around, but what I can do is send my deepest thoughts, prayers and sympathies to all of those affected.  I can’t imagine the level of pain and suffering you are all experiencing.  This article; however, isn’t directed at you.  There is nothing I can do to ease your pain.  This article is for the rest of us who weren’t directly affected by the incident, but may be indirectly affected by certain parties’ emotional response to it and by those that will exploit it to justify agendas.

One of the key lessons from all of human history is that the easy way to deal with any tragedy is to scapegoat.  In some cases, like in Nazi Germany, the scapegoat proved to be unpopular minorities, especially Jews.  These days, many Americans have fallen into the trap of scapegoasting Muslims and the Islamic religion for all the bad things that happen on the planet.  The key similarity I see in these sorts of situations is that the population affected by some trauma (hyperinflation and economic collapse in Germany and 9/11 in the United States) tends to resort to the knee-jerk reaction of scapegoating an easy target rather than diving into the complexities of the issue and engaging in societal self-reflection.  This is extraordinarily dangerous.

From what I can tell, some of the most ridiculous polices are the direct result of a trauma, people getting emotional, and then begging for a response.    In my own lifetime, 9/11 is the perfect example.  Our national response to a gruesome attack that killed thousands of innocent civilians was to tear up the Constitution, specifically the cherished Bill of Rights, with insane Big Brother type legislation like the “Patriot” Act.  We basically launched the war on terror by waving a white flag.  Truly defeating terrorists wouldn’t have consisted of running to the mall and shopping, as George W. Bush insisted, or giving up the freedoms that made America the most attractive country to move to for the last two hundred years.  The way to judge victory or defeat in the “war on terror” eleven years later is not to check the statistics on terrorist attacks.  They way to judge victory or defeat is to look at the nation economically, socially and politically and ask yourself are we better off or worse off?  I think the verdict is clear on that front, and I do in large part blame our childish and emotionally reaction to the national tragedy of 9/11.

Well here we stand in mid-December 2012, just days from the Mayan end of the world and another national tragedy has been unleashed on the land.  Most of the victims were innocent, helpless six and seven year old children that never even had the chance to fulfill their potential on this planet.  Unfortunately, just as Ron Paul told us, key parts of the Patriot Act were written and desired by certain factions well before 9/11, there is a powerful faction in the highest echelons of the elite that have wanted and continue to want to remove guns from the hands of innocent American citizens.  These people are not interested in easing violence; these folks want to disarm the public before the mathematically inevitable economic collapse occurs (see my article “Slaves are Always Disarmed”).  While many of these folks claims publicly that there is an “economic recovery” and happy days are just over the horizon, they know better and privately want to get all their ducks in a row before the final and horrific collapse occurs.  This is why the surveillance state is making such aggressive strides at the moment.  It is also why there is a panic to remove firearms from the public.

The person who bothers me the most on this entire topic is Mayor Michael Bloomberg, of my hometown NYC.  You can tell when someone is disingenuous if they freak out over gun violence like it is the biggest issue in America today and at the same time protect the banksters and their “too big to fail” culture, which has and continues to systemically steal trillions of dollars from the poor.  This is Michael Bloomberg to a tee, so this man should have no credibility on any moral subject when he protects and coddles the most dangerous criminal organizations on this planet.  I guess there is something “liberal” about white collar crime.

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Fed Statement is Laughable: The Precious Metals Consolidation is Over

I haven’t written anything about the markets in a very long time due to the experience in extreme boredom that they have become as of late.  The election came and went and now that we are just ahead of the Holiday Season the apathy has hit monumental proportions.  More significantly, what was the point of doing anything ahead of today’s Fed meeting?  There wasn’t any and so nobody did.

Now that the announcement is out, I think in retrospect today will turn out to be a meaningful turning point.  Not so much because of what they said, but because of where certain markets are and because of what they didn’t say.  Let’s start with the latter point.

From the statement, we found out that the Fed is set to launch an unsterilized buying program of $85 billion per month ($40 billion in mortgage backed securities and $45 billion in treasuries).  This part was widely flagged already.  The more interesting part is the language in the text discussing how the Fed will essentially link their low rates to unemployment, with 6.5% being the threshold.

This is all within a text that attempts to portray a very benign and healthy economy, one described as having an improving labor market, a housing recovery and anchored inflation expectations.  Sounds pretty good to me; so then why accelerate the aggressiveness of their radical money printing policy?

The answer is that the Fed realizes its policies haven’t worked and are convinced they need to do more and more to prove an academic point that man is indeed more powerful than nature.  At first, they said a stock market rally would set a fire under the economy.  That hasn’t worked.  Then they said a new housing recovery would do it.  Once again, nein.  So now their answer is just print money like crazy and eventually it will work.  Yes, they are insane, but we already knew that didn’t we.

Actions always speak louder than words and their actions demonstrate a deep concern for the real economy and an unspoken understanding that things are not going well underneath the layers of propaganda.

Now onto the second point.  I think today will mark an important turning point in the markets not just because of what I wrote above, but because of where things stand.

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A Thanksgiving Message

The older I get, the more thankful I am on each and every Thanksgiving.  On this day, I am thankful for all the wonderful things in my life and the blessings I have been provided with, but there is something else I am thankful for.  Something that everyone should be thankful for since it presents such great opportunity.

Each and every one of us faces very different circumstances and challenges on this day, but pretty much everyone reading this shares one very special thing with one another – a tremendous opportunity to change the world together.  While I firmly believe that we are at a huge crossroads politically, socially and economically as a nation, I believe we are at an even greater crossroads as a species.  Back in my college days, I felt that things could never sustainably change on a planet level for the better without a change in consciousness. Back then, I cynically couldn’t see how such a consciousness shift could happen in my lifetime, but then a few years ago a strange thing happened.  I started noticing a shift in consciousness within myself and within many of the people around me.  I still don’t know exactly what happened, but I think the internet played a huge role. This awakening sends shivers down the spine of the power structure, but should be cheered to the heavens by the rest of us.

I firmly believe Gandhi’s sentiment to “be the change that you want to see in the world” applies now more than ever.  One thousand years ago, most people couldn’t read, had almost zero access to any knowledge, and the most contact they would have with the world beyond themselves might be an occasional visit from a neighboring village or some army rolling in to invade. Think about what prior generations would have given to have had the tremendous opportunity that we have.

I was already a huge optimist in the ultimate outcome of all of this before I joined Twitter, but believe it or not, this social media network has made me twice as optimistic.  I only joined this service in May, but I believe it to be one of the most powerful and effective tools of humanity’s advancement I have seen.  To witness first hand a Jewish hacker interact and aid a Muslim activist trying to avoid the censorship of his oppressive regime live on my stream was one of the most beautiful things I have ever witnessed.  These sorts of things are happening on various levels every second of every day.  Twitter, social media and the internet generally allows humans for the first time in recorded history to reach out to people tens of thousands of miles away, in countries we know nothing about and in many cases are told to hate, and say “hey brother, you are not my enemy and despite our respective government’s attempts to manipulate us into hating each other, I do not hate you.”  As soon as we all learn to do this on a wider scale, the world will fundamentally change for the better.  For this opportunity, I am extremely thankful and I hope you all are as well.

I want to conclude with the words of Tecumseh:

Live your life that the fear of death can never enter your heart.
Trouble no one about his religion.
Respect others in their views and demand that they respect yours.
Love your life, perfect your life, beautify all things in your life.
Seek to make your life long and of service to your people.
Prepare a noble death song for the day when you go over the great divide.
Always give a word or sign of salute when meeting or passing a friend,
or even a stranger, if in a lonely place.
Show respect to all people, but grovel to none.
When you rise in the morning, give thanks for the light,
for your life, for your strength.
Give thanks for your food and for the joy of living.
If you see no reason to give thanks, the fault lies in yourself.
Abuse no one and no thing, for abuse turns the wise ones to fools
and robs the spirit of its vision.
When your time comes to die,
be not like those whose hearts are filled with fear of death,
so that when their time comes they weep and pray for a little more time
to live their lives over again in a different way.
Sing your death song, and die like a hero going home.
– Tecumseh
(1768-1813) Shawnee Chief

You can follow me on Twitter here.

With warmth, peace and love on this Thanksgiving Day,

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My Thoughts on the Election: The Devil You Know

Politics is the entertainment branch of the Military-Industrial Complex.
– Frank Zappa

Democracies die behind closed doors.
– Judge Damon J. Keith

Every act of creation is first of all an act of destruction.

My Thoughts on the Election: The Devil You Know
Regular readers know that I voted for the Libertarian candidate for President, former Governor of New Mexico, Gary Johnson.  I outlined my reasons for this choice in several posts, most definitively in my piece Meet Gary Johnson: The Libertarian for President Polling at 7% in Colorado.  While I was already excited for my first act of Presidential civil disobedience, I didn’t realize how truly liberating it would feel until the next morning.  Many Americans voted for “the lesser of two evils” and were disappointed in the result.  This must have been an emotional double whammy in the sense that not only did the guy you disliked so much that you were willing to vote for a candidate you didn’t like win, but you didn’t vote your conscience.  Personally, I didn’t have to deal with either emotion because I voted for the person I liked the most despite residing in a swing state.  What allowed me to do this was the complete and total recognition that under both major candidates America loses.  My major issues are:

1) The Federal Reserve scam and Wall Street theft.
2) Civil liberties and the destruction of the Constitution.
3) Our aggressive foreign policy and imperial wars abroad that help only the oligarchs and impoverish the masses.

On these three issues, Mitt Romney would have been as bad if not worse than Obama and that is why Mitt Romney lost.  There has been a lot of talk in the past few days about the future of the Republican Party and rightly so.  The strange genius of Obama’s first term was that it was a perfect continuation of the disastrous policies of George W. Bush, and he was able to get away with it because of the “left cover” that the brainwashed fake liberal class in America provided him.  This left the Republican establishment desperate and confused and this came through crystal clear in Romney’s Presidential run.  Unless the Republican Party rids itself of the chicken-hawk, neo-con, warmongering contingency that seems to have a peculiar obsession with the female gender’s reproductive habits, they are doomed to disappear.  It is so out of step with the growing political awakening in America it’s not even funny.  Meanwhile, the Democratic Party has basically become the Republican party under George W. Bush with the exception that they support abortion and gay marriage.  Politics is becoming very interesting indeed.

I have to admit that I was much less irritated by Obama’s victory on Wednesday morning than I expected to be.  There are several reasons for this.  First of all, he is the devil we know.  By this I mean that the resistance to Obama and his crony-capitalist, fascist policies is reasonably well advanced.  Obama spent his entire first term blaming his predecessor for the crappy economy.  He will have no one to blame but himself in the collapse that is coming.  This is good and will allow people to finally focus on some real issues.  Furthermore, there are many prominent progressive journalists and activists that held his feet to the fire throughout his first term and will continue to make the arguments in the second.  On the other side of the political spectrum, although Gary Johnson received a disappointing 1% of the popular vote, he still did get 1.1 million votes and the Libertarian movement is strongest with the youth, which is of course the future.  While still only a bud barely breaking the surface of the soil, the Liberty Movement is alive and well and will only grow in the years ahead, as power is transitioned from the baby boomers and their tired ideas to a new generation that sees the world very differently from their parents.

I believe that had Romney won, the fight to really change things would have been delayed.  His supporters would have held back criticism for a while as they “hoped” that he would make it all better.  It would have take a little while for them to realize that he is just another crony capitalist oligarch puppet.  Based on his comments and Wall Street backing, there is no doubt that he would never have done absolutely zero in the realm of structural reform.  The country has cancer, not a common cold, and our response therefore must be much more serious than either of these corporate candidates are willing to commit to.  We know that such legitimate change will not come from the political class and Gary Johnson’s disappointing result proves to me that things will have to get ten times worse before the public gets the joke.  Unfortunately, it will get ten times worse in the coming years, and I strongly believe that 2013-2016 will be a historic period in the political transformation of the United States.  The show is over.  It’s time to buckle up.

Peace and wisdom,

The Seventy Percent

Whoever expects to be ignorant and free in a state of civilization expects what never was and never will be.
-Thomas Jefferson

Bipartisan usually means that a larger-than-usual deception is being carried out.
-George Carlin

The Seventy Percent
People are going to be pissed off no matter who wins this election and that is a very important social dynamic I believe is vastly under appreciated by the majority of mainstream pundits and analysts out there.  This is also very distinct from the environment that prevailed in 2008.  Four years ago, the financial markets were crashing and the economic future of America was circling the toilet bowl, yet a majority of Americans embraced the potential of a young, inexperienced biracial politician from Illinois who was saying all of the right things.  Despite the gigantic disappointment he has proven to be as President, there is no denying that he had all of the Democrats and most Independents under his spell on this day four years ago.

Fast forward to 2012 and the county isn’t “divided” as mainstream media talking heads like to say.  The country is pissed off.  Genuine and legitimate frustration permeates the land from sea to shining sea and rightly so.  Ever since the banker coup of 2008, crony capitalism has been institutionalized as the only real way to make money.  If you aren’t connected or “too big to fail,” sorry but America isn’t the place for you.  What makes the economic nightmare so much worse is that it is being coupled with a complete and total decimation of civil liberties.  One by one the Bill of Rights is being ignored and indeed trampled on systemically by the political and economic oligarchs emboldened by their successful takeover of the executive, legislative and for the most part judicial branches of government.  Many Independents disagreed with Obama’s economic philosophy but gave him a pass because he promised to end the wars overseas and restore civil liberties.  Instead, what we got was a President who signed the NDAA on New Year’s Eve 2011, which included section 1021, allowing for the indefinite detention of American citizens without trial until the “end of hostilities.”  Well, because now know the Orwellian “war on terror” is never-ending, the indefinite detention is forever.  The worst part is that Obama claims he didn’t want these powers yet when a group of high profile plaintiffs filed a lawsuit against section 1021 and won a ruling deeming it unconstitutional, what was the President’s response?  He appealed it to death until he found a panel of judges to agree with him.  Not only did he want this power, he seems to crave it.  Another well deserved Noble Peace Prize.

The above is just one example of many.  His kill list, which the Administration now refers to as the “disposition matrix,” grows by the day to include people with zero affiliation with Al-Qaeda, and Obama seems to relish in the absolute power of being judge, jury and executioner.  Tragically, a President Romney will be no different.  He is already on record supporting the NDAA, war without Congressional approval and we heard his complete and total support of Obama’s drone strategy during the third and final debate.  Sure, people that care about civil liberties will vote for Romney saying that he will at least be better on economic policy, yet that is the exact same thing people did with Obama in reverse.  They ended up being disappointed with him and Romney will disappoint as well.  These guys are both big government, crony capitalist puppets and that’s the bottom line.

Another thing that must be considered is basic math about the U.S. political landscape.  According to the latest Gallup poll, 32% of Americans identify themselves as Democrats, 28% as Republican and 38% as Independents.  Now of course, amongst the Independents a majority lean more toward one party or the other, but this is much less the case today than it was in 2008 or in any election prior.  Furthermore, the mere fact that so many choose to identify in this manner makes it clear that they are unhappy with either of these political gangs.  These Independents want legitimate third, fourth or fifth party options but instead end up herded into the mainstream parties by a sophisticated corporate scam, part of which centers around the Commission on Presidential Debates, the gatekeeper of these circuses which ensures no alternative candidates can debate and excludes any difficult or uncomfortable questions.

There was a fantastic article written in the Huffington Post yesterday that examines the rampant frustration within the Republican Party titled: Frightened Republicans Try to Close Down Election Competitors, Such as Gary Johnson.  I thought the most powerful quote was:

Both the Republican and the Democratic presidential candidates talk about liberty, freedom, fiscal responsibility, free enterprise, choice and the Constitution. But neither candidate believes in those principles. Elect either Barack Obama or Mitt Romney, and government will be bigger, spending will be higher, regulation will be more intrusive, the military will be fighting more wars, more service personnel will be dying, more money will be wasted abroad, civil liberties of more people will be violated, and more privacy of more citizens will be invaded. Overall, the free society will continue to retreat.

The above is invariably true and brings me to the key point of this article.  Should Romney win the 28% of Americans that identify as Republican will be thrilled, and the remaining 72% will be largely upset and on edge.  Should Obama win, similarly, the 32% registered Democrat with be thrilled and the remaining 68% will be upset and on edge.  Hence, the 70% referred to in the title of this article.  This is a recipe ripe for social unrest and it will be coming to our shores as I outlined recently in The Global Spring.

Personally, I am done with the two party system and will be voting for Gary Johnson.  I am not playing their games any longer and I will not fall for any more of their scams.  In my brief voting years I have pulled the lever for both Republicans and Democrats, but I do not think I will vote for any one of them ever again.  I implore everyone to do the same, no matter who you vote for, vote third party.  The only wasted vote I see is one for either Mitt Romney or Barrack Obama.

Peace and wisdom,

The Last Domino

Whenever you find yourself on the side of the majority, it is time to pause and reflect.
– Mark Twain

I think we’re being run by maniacs for maniacal ends and I think I’m liable to be put away as insane for expressing that. 
– John Lennon (watch the video of Lennon actually saying it here)

We the people are the rightful masters of both Congress and the courts, not to overthrow the Constitution but to overthrow the men who pervert the Constitution.
– Abraham Lincoln

The Last Domino
With the U.S. Presidential election less than one month away, I think it’s a good time to take stock on what has occurred in 2012 so far and look forward to the period ahead, which I think will be one of increasing social and economic chaos in the United States.  Earlier this year I wrote a piece titled Six Months Left…Can They Do It? in which I questioned whether the Administration and its cronies at the Federal Reserve and elsewhere would be able to hold  things together in a relative calm until November 6th.  I wasn’t sure of their ability to do so, but I understood that everything would be thrown toward this objective, legal and illegal, to make it happen.  Well here we are, and to some degree they have held the undeniable disaster that is very apparent underneath the superficial surface of American society from exploding upwards.  Back in May I wrote:

Well the past is the past and the future lies right ahead, so how should we be thinking about things?  The assumption that is being made, and to some extent has to be made, is that if they have been able to pull off this total coup of the financial markets for the past seven months why can’t they keep it going until the election.  Well if we are to assume this, it means we must assume they can pull it off for six more months, which would bring the total to thirteen months.  This would be quite a feat.  They know how difficult it will be to keep things “together” in the markets amid a real world that is falling apart.  This is why the Fed is pretending there will be no more liquidity added to the system.  In their minds, the best strategy is to talk down QE while at the same time attacking commodity markets behind the scenes.  In their mind, this will give them the cover to create trillions more for their banker shareholders.  I have stated that this would be the plan and as we can see in the markets lately, it has been executed to precision.

It was always my contention (and still is) that if they successfully kicked the can until the election then there would be absolute hell to pay afterward.  That payment is now due.  The best way I can describe what I think the next six months will look like is: Europe.  Think the periphery countries.  Everything that we have seen in Greece, Spain and the other “PIGS” will be coming to America.  Investors have become completely lulled to sleep by recent benign trends in U.S. markets.  There is this almost religious belief that treasury yields will move sharply lower in an economic downturn or stock market plunge.  I am not saying this won’t be the case, but it is certainly not set in stone.  In the PIGS nations, we saw both collapsing economies and stock markets as well as soaring sovereign yields.  Can’t happen here?  Never say never.

That said, my assumption is that in the initial stages of the forthcoming move we could see treasury yields move lower as stocks head down to reflect the reality of the the much deteriorated earnings and economic environment as well as the realization that no real stimulus is coming other than continued money printing (which will not help the economy one bit).  However, the one assumption that I think will be proven incorrect almost immediately is the notion that precious metals must get sold off hard in an equity market drop.  The metals have been officially capped by Central Planners in biblical fashion over the past 12-18 months, and a lot of physical has simply been taken off the market that will not be coming back.  We have also seen the Italian and Portuguese populations fleeced of their metal in this year long correction, as well as lower income folks in the United States, when we saw earlier this year when EZCORP Inc. told us that pawn shops were running out of gold.  Physical metal will not be available at these prices when people realize how much they need them and any manufactured paper dips will be bought aggressively.

Dow/Gold Ratio is the Tell
I know I sound like a broken record on this one, but I am completely convinced that this ratio tells you everything you need to know from a macro standpoint.  I’m not just talking economics either, I mean from a societal perspective as well.  Yesterday, this ratio started to breakdown and I think this marks the beginning of a major move lower toward my six month target of 5.5x-6.0x.  This would represent a roughly 25% move from here to the lowest level since the secular bear market in stocks began in 2000/01.

The biggest mistake I made in the past year or so was a failure to realize the step by step fashion in which the global monetary and financial system would fall apart.  It is certainly happening in a slower manner than I had anticipated, but make no mistake about it; it is happening.  Like everything else, in retrospect, it becomes much more obvious.  Since the entire world is linked into the fiat petro-dollar monetary standard, the entire world suffers as the system breaks down.  While it was tempting to assume the U.S. would get nailed the hardest, what many people missed, including myself, was that the U.S. would be the last domino to fall.  Whether people want to accept this or not, the U.S. has unfortunately morphed into a global empire.  So as the empire crumbles, it is actually the regions of the empire that collapse first, one after the other.  The first evidence of collapse occurred in North Africa with the “Arab Spring.”  This makes sense as this part of the world is most vulnerable to the pressures evidenced by global systemic failure.  They were in essence the “weakest link” in the chain.  Shortly afterwards, the PIGS experienced similar economic collapse and social unrest.  Unrest that continues to this day.  Most recently, we have witnessed the collapse of China’s “economic miracle.”  What people fail to comprehend is that China’s recent decline is completely linked to the decline of the monetary system itself as well. Let me explain.  China is attached to the hip of the U.S. empire as a result of its foolish decision to put trillions of its fiat U.S. dollars into what are even more worthless treasuries (more worthless because you have to sell them before you can spend them and they can’t do that too easily).  As such, they were unable to make rational economic decisions in the aftermath of 2008.  Instead, they doubled down on a ponzi growth strategy.  It was their trapped position in U.S. treasuries which gave them little room to detach from the petro-dollar empire, and as a result they tried to boost growth by “playing ball” and supporting an unsustainable system and they got what was coming.  Collapse.  Thanks for playing boys.

It is at this point that I want to compare two charts.  The first is familiar to my readers.  The second is not.

Dow/Gold Three Year Chart

Shanghai Composite/Gold Three Year Chart

So the first chart is one all of you know very well.  It charts the Dow Jones Industrial Average in real terms, and this thing has been in a bear market since 2000.  Even over the past three years of  “recovery,” you can see stocks in terms of gold are down over 20%.  The more interesting thing is the chart of Chinese stocks in terms of gold over the same period.  They have gotten absolutely shellacked.  Down more than 60%, or three times as bad as U.S. stocks.  The same would be seen if you priced let’s say Spain’s market in gold.  In fact, it is even worse than China!  The point is, this is what happens in today’s world when you are faced with a downturn.  This is what is coming to U.S. markets next.

The Streets of Europe:  Coming to America
So my message is clear.  I think now with the election right around the corner, the chickens are going to come home to roost.  Our ability to print our own currency and buy all the commodities we want with it is the exorbitant privilege that allowed us to export most of the problems within the monetary system elsewhere first.  As Nixon’s Treasury Secretary John Connelly said when confronted by a group of European Finance Ministers: “it’s our currency, but your problem.”  At the time he was correct, as we were at the very beginning of the fiat dollar standard.  41 years later the system is in its final days and our currency is about to become our problem as well.

There were always going to be massive consequences to keeping this ponzi alive.  What is extremely unfortunate is the small number of U.S. citizens that actually understand specifically that the root of every problem we face right now is the fiat dollar monetary system, because it gives all the power in the country to the Federal Reserve and the TBTF banks that tell Banana Ben Bernanke what to do.  Since 2008, many of the consequences of the fraud called American Crony Capitalism Inc. have been clear, but it has yet to hit the boiling point.  I believe that the boiling point will be hit sometime within the next six months, and 2013 will see the streets of America  beginning to look a lot like the streets of Spain and Greece.

Interestingly enough, one of the key signposts for the next wave of civil unrest and activism is coming from the employees of Wal-Mart.  This is quite fitting considering the company is the largest private employer in the United States with approximately 1.5 million workers.  Moreover, the fact it is happening at a company so anti-union makes it sure to have a sizable impact on the American psyche should it continue to grow.  The strikes began in 12 states about a week ago, and although it is estimated that only 0.01% of Wal-Mart employees are involved, it is still the first multi-store strike in the company’s history (for a good summary of what is happening, read this Salon article).  More significantly, strikers are now threatening stepped up action during Black Friday.  Think it is a coincidence that right now in late 2012 is when Wal-Mart workers are pulling off the first such action in 50 years?  Think that this is just a one-off situation?  Not a chance.  The main point here is one I was hammering on in my last piece The Global Spring.  You can only push people so far into hardship before things snap.  They snapped in North Africa.  They snapped in Southern Europe.  They snapped in China.  They are about to snap here.  Oh, and one last thing.  What do you think all of this signals for corporate margins?

Peace and Wisdom,

The Global Spring

My hands are tied
The billions shift from side to side
And the wars go on with brainwashed pride
For the love of god and our human rights
And all these things are swept aside
By bloody hands time can’t deny
And are washed away by your genocide
And history hides the lies of our civil wars

D’you wear a black armband
When they shot the man
Who said “peace could last forever”
And in my first memories
They shot Kennedy
I went numb when I learned to see
So I never fell for Vietnam
We got the wall of D.C. to remind us all
That you can’t trust freedom
When it’s not in your hands
When everybody’s fightin’
For their promised land

I don’t need your civil war
It feeds the rich while it buries the poor
Your power hungry sellin’ soldiers
In a human grocery store
Ain’t that fresh
I don’t need your civil war

– Guns and Roses “Civil War

The Tipping Point
Serfdom has simply been pushed too far.  Globally.  What we are about to witness, incredibly, is not just a change in the way that one or two countries or even a specific region of the world operates.  No, what we are about to witness is a complete transformation globally, a change that I believe will be incredibly positive and will ultimately free us from the shackles upon the minds of humanity as a species.  The internet has allowed us to connect with one another in a manner never before possible, and this tool has permitted us to blast through the lies of the global elite that is desperately trying to hang on to control.  Whether it was the intention from the outset or not, what globalization has created is a very small class of incredibly wealthy people that are extraordinarily corrupt as a group and also above the law.  They are able to hide enormous amounts of money.  They are able to insider trade.  They are able to deal drugs.  They can do whatever they want, yet if anyone below them does the same they are prosecuted in a manner that resembles Medieval torture.

Many people say to me, “but Mike, aren’t things always corrupt, hasn’t it always been this way?”  To this I answer yes and no.  Of course within any complex societal and political structure there will be elements of corruption.  This is obvious.  However, there are cycles of corruption and degrees.  At some point, particularly toward the end of a cycle where globalization creates this “super corrupt class” of individuals roaming the planet doing as they please with us pawns, you reach a tipping point.  That tipping point has already been reached.  What we are witnessing now all over the world are merely the effects of that tipping point clashing with the corrupt global elite that refuses to budge an inch and reform even though it is in their best interest to do so.  No, they are so arrogant and criminal after decades of doing what they please with zero consequences they would rather attempt to implement a global police state rather than deal with the nightmare of their actions and make the world a better place.  Therefore, it is up to us, as a species, to reclaim what is our birthright.  Freedom.

As I wrote the other day on twitter, what we have today is not Socialism or Capitalism, it is Ponzism.  I am talking on a global level.  Basically every country and every region.  The biggest pitfall we must avoid as a species is allowing the global power structure to pit us against one another.  These guys don’t fight wars, they send you to fight them.  Don’t fall for it.  Their number one trick once things get bad within their own nations is to attempt to create a war.  This checks two very important boxes for them.  First, it creates a distraction for the general public and even makes them think that they are part of a team that needs to be cheered.  It’s like a big football game but with thousands or millions dying on the field.  Second, it allows the government to do pretty much anything they want in the name of “winning the war” or “national security.”  This is exactly why the “war on terror” was the perfect war for a kleptocratic elite.  It is a war with no end, so theoretically they can constantly claim war as an excuse for taking away civil liberties.  The problem for them at the moment though is that the American people are waking up to this scam.  Therefore, a larger and much deadlier war is in their best interests.  If it is in their best interest you can be sure it is in our worse interests. Therefore, we must do everything we can to prevent it.

The Global Spring  
When the “Arab Spring” broke out early last year, many simply took it to be an outburst of rage and frustration from a region that has been shackled by autocratic regimes, lack of economic opportunity and cultural stagnation.  While it was the surge in global food prices that catalyzed the event that we now refer to as the Arab Spring, what I think was under appreciated and continues to be, is that fact that this was merely the first major outburst in what is certain to be a Global Spring.  The world’s population centers in general are increasingly able to identify with the frustration of those in the Middle East, so far removed from our psyches just a decade or so ago.  The most important thing for us all to realize is that there is another way.  We have infinite potential as a species to create, innovate and evolve.  We just need to collectively remove the gigantic jackboot from our face.

The number of events happening at the moment that provide evidence of the emerging Global Spring are almost too many to keep track of, but in the following paragraphs I will try.  I assume that most everyone reading this piece is aware of these events, but what I am trying to do is explain my thesis that all of them are essentially related to the same theme.  A massive global uprising against the current status quo and the economic and political systems that it has put in place.  People are becoming increasingly aware that these systems are run by the few and for the few, and the boiling point is being reached.  Community by community and nation by nation.  Let’s start with China.

Unless you have been living under an economic rock for the past six months, you are aware that China is in the midst of a serious economic slowdown.  As I have said for years and continue to say, this is not a small bump in the road.  This is a major contraction.  Similar to the U.S., China had a choice in the 2008 slowdown.  They could have taken the hit and moved toward measures to rebalance the economy away from an over emphasis on investment and construction spend and toward consumption, but they did nothing of the sort.  Rather, they doubled down on their prior mistakes and mal-investments in an epic bet on the ponzi economy.  After a brief sugar high, this has now failed.

So with the economy back in steep decline, the authorities fear pumping massive stimulus in as they did four years prior due to their justifiable fears of sparking rampant inflation.  Meanwhile, thanks to social networking, citizens have become more aware of the incredible corruption and theft of their leadership, whether in the political or business world.  They are increasingly acting out about it and it is becoming so blatant that even China’s legendary control of media is unable to direct the plot.  The most recent outburst came from the Foxconn (a major supplier to Apple) factory in Taiyuan, China which employs 79,000 people.  While details are sketchy, most accounts point to the riot, which reportedly involved 2,000 people, being sparked by a fight between security guards and workers.  From the Washington Post:

When guards beat up workers from Shandong province, others from the same region fought back, igniting a full-fledged riot, according to the news agency’s (China News Service) account.   

The young migrant workers whose labor has fueled much of the growth of China’s economy and the global manufacturing sector have begun to change in demographics and desires. That labor pool is shrinking, according to experts, as workers from China’s provinces have become better educated and hold higher expectations for their lives.

Foxconn, in particular, has drawn attention in recent years because of its connection to Apple and the increasingly visible signs of unhappiness among its workers. A string of employee suicides in 2010 pushed the company to install netting to catch jumpers and take other steps.

Anyone think this is an isolated event?  Didn’t think so.  While this is the most high profile riot as of late, the New York Times in its coverage of the incident wrote:

Many of the protests this year appear to be related to the country’s economic slowdown, as employees demand the payment of overdue wages from financially struggling companies, or insist on compensation when money-losing factories in coastal provinces are closed and moved to lower-cost cities in the interior.  

Of course, China’s leadership was well aware of all of this before the Foxconn incident came onto the scene, so what is a good authoritarian regime to do?  Well, you attempt to direct the rage and angst to an outside enemy.  In this case Japan.  Zerohedge has a great report on the anti-Japanese violence and hatred that burst onto the scene recently.  The link to their piece Postcards from a Furious China really says it all.

Like the Middle East, the Southern countries of Europe have been in and out of rage now for almost two years.  The most recent explosions onto the streets of Greece and Spain are particularly disturbing since the inept clownish leadership on the Continent had supposedly “solved” the crisis for the third time just a few weeks ago.  Or was it the fourth time?  Really, who’s counting anymore…

Let’s start with Spain.  While Greece is still on fire, Spain is where the real action is due to the size of its economy and the importance it has to the political EU hacks.  Not only were there enormous protests this week in the capital Madrid in reaction to austerity measures, but there is also a very significant secession movement picking up steam in Catalonia.  This isn’t about leaving the euro, this is about leaving Spain!  For those that aren’t aware of Spanish geography, Catalonia is the wealthiest region in Spain and it is where Barcelona is located.  First, we saw enormous protests in Catalonia about a month ago, which I covered here.  Now we see that last night the regional parliament approved a referendum on independence that will apparently be voted on during regional elections on November 25.  Reuters covers the story here.

While this is hugely important, let’s not overlook the massive demonstrations in Madrid this past week.  I will let this powerful video below do the talking.  Draghi says “the euro is irreversible.”  Don’t make me laugh.


Now let’s talk Greece.  I think a lot of people brushed off this week’s protests as “oh it’s just the Greeks in the streets again.”  This is a mistake.  These demonstrations were different and here is why.  From the UK’s Guardian:

Read the Full Article »

2013: When Money Printing Meets Supply Constraints

Historically, the most terrible things – war, genocide, and slavery – have resulted not from disobedience, but from obedience.
– Howard Zinn

We cannot defend freedom abroad by deserting it at home.
– Edward R. Murrow

Talent hits a target no one else can hit; Genius hits a target no one else can see.
– Arthur Schopenhauer

2013: When Money Printing Meets Supply Constraints
I think 4Q12 and then 2013 will in many ways be the polar opposite of what we have seen thus far in 2012.  As you all know, this year is a presidential election year in the U.S., which means predictably that the incumbent president does everything in his power (which these days is pretty much everything) to get reelected.  As with everything else in life, there is no free lunch and there will inevitably be painful payback next year as the necessities of being returned to power fade momentarily.  This is sort of obvious.  What I find much more interesting is the actual global macroeconomic backdrop combined with what Central Planners have done as of late.  Since late 2011 the Central Planners of the world began trying out a new strategy.  Delay and jawbone, or propagandize and pray.  In other words, when things started looking dicey all of these naked emperors (particularly in the EU) would call a meeting and threaten to take “drastic action” or some nonsense like that.

Let’s Talk EU
While the EU did engage in real action via the LTRO, this was basically just another shell game within a massive shell game of a financial system.  The best way to really see what has happened in Europe is to take a look at the chart of Spanish 10 year government bond yields versus when the ECB has taken action.

Spanish 10 year Chart       

As you can see above, yields spiked in late November and the response was the first LTRO program.  This smacked yields down significantly, but things were still dicey and at the end of February they went for LTRO 2.  As the chart demonstrates, the low in yields corresponded almost perfectly to LTRO 2 and from there on out they started soaring again, only to hit a new high of over 7.5%.  Importantly, this was significantly higher than that the spike to around 6.6% in the fall of 2011, which had policy makers running around like chickens with their heads cut off.

Amusingly, the rhetoric from EU policymakers has become even more intense, frantic and aggressive in the last few months as clearly their prior grand plans have been complete and total failures.  Statements are being made over and over like “the euro is irreversible” and other nonsense like that.  First of all nothing in life is irreversible and I am quite certain Moctezuma was standing high above the earth yelling similar things from the grand Aztec pyramids right as Cortez was landing his ships.  Such statements actually cement the euro’s ultimate demise in my mind.

So with the latest ECB call to action, Spanish yields have once again plunged a massive 200 basis points from over 7.5% to a little above 5.5%.  If recent history is any guide, this move lower will be temporary and the market will once again force more desperate action and ultimately severe currency debasement.

What About the United States?
While the spotlight has been on EU issues and China’s economic collapse this year, I think most of the attention will be on the U.S. in 2013.  Not only will there be payback for the election year nonsense that has held things together, but I think the market will finally force some real action.  This means some very difficult decisions for The Bernank.  As I mentioned above, although a lot of what the ECB and EU Central Planners have done over the past 18 months has been jawboning, they have taken some concrete steps to perpetuate the ponzi.  The Fed on the other hand has been given a free ride for the most part, as they have been able to get asset prices to inflate without having to expand their balance sheet.

Fed Balance Sheet 

As you can see, the Fed’s balance sheet has basically flat-lined over the past year or so.  They have mainly jawboned to keep thing together by threatening to do more should the economy deteriorate.  Yes they have also done “Operation Twist,” but this is largely meaningless in the grand scheme of things.  The game is all about publicly creating new money and buying securities with it and as of late we haven’t seen that.  It is no coincidence that gold has experienced a major consolidation during the same time the Fed has kept its balance sheet steady.

The above paragraph was as far as I got at around noon yesterday ahead of the huge decision from the Fed to initiate QEI (or QE to Infinity).  It’s interesting that just as I was writing about how the ball was about to be in their court, The Bernank pulled out the nuclear option.  For my thoughts on the decision please read my post from yesterday titled The Gun Has Been Fired: Precious Metals to Hit New Highs.  Also worth a read is my piece from earlier this year that predicted the inevitability of such a panic move by Bernanke in The Big Print is Coming.

The Big Print is Here
So here we are folks.  The end of the line in monetary policy.  The world changed yesterday, and while you can’t tell it from the VIX volatility index, I think volatility is about to soar.  It may be kept under wraps until the election to some degree, but the closer we get to early November the wilder the swings in most asset prices will become.  The fact that this happened yesterday fits in perfectly with the main theme of this piece.  As we entered 2012, China still appeared to be growing solidly.  As a result, the consensus was that investments in China economic growth sensitive commodities such as coal and iron ore would stay at elevated enough levels to keep mining investments on track and with attractive return profiles.

I have for a long time been negative on the “China story,” which is why my top recommendations for the past several years have been precious metals, agriculture and oil.  These are in my view necessities.  Money, food and energy.  They will not see as elastic demand swings from economic weakness and will benefit significantly from currency debasement.  They remain my top assets in which to be in to preserve wealth.  In any event, the China ponzi appears to have now popped, and as a result, the prices for certain commodities like coal and iron ore have plunged.  This is extremely important because it is already causing a major pull back in capital investment within the commodities arena.  Take a read of this Reuters article from a few days ago: Australia miners slam brakes on huge pipeline of projects.  The first paragraph says it all:

MELBOURNE, Sept 13 (Reuters) – A $246 billion pipeline of planned mining investments in Australia is on increasingly shaky ground, with nearly half already frozen or likely to be delayed, as miners and lenders wrestle with high costs and sliding revenue.

It’s not just coal and iron ore either.  BHP just recently decided to cancel its Olympic Dam expansion, which is primarily a copper and uranium mine that was supposed to be one of the companies “mega-projects.”

The supply constraints are not just from project cancellations based on China’s slowdown.  Let’s not forget the ongoing violence at platinum mines in South Africa.  From today’s Wall Street Journal:

The move comes as more mining companies suspended operations amid continuing protests that have kept miners away from some of the country’s biggest platinum and gold operations, destabilizing the sector and threatening to curtail South Africa’s growth prospects.

I mean does anyone think these things are going to go away any time soon?  Moreover, the Middle East is getting more unstable by the day and if anyone thinks an attack on Iran is off the table with these maniacs in charge of the Western world you’ve got to be in dream land.  As I have shown many times before, the Saudis are already pumping at decade high rates and will be unable to come to the rescue.  See the chart below.

Saudi Arabian Monthly Oil Production

The Set Up is Complete
The fact that the Fed has already instituted QEI means the setup is complete.  Things may be kept together for another month and a half until the election, but the closer we get to that date the more concerned I would get.  Money printing is about to have a head on collision with supply constraints, which is likely to lead to even more money printing.  If I had to guess, I would say the single most likely thing to knock this Zimbabwe equity rally right on its back will be a monster oil price spike.  With the Saudis already pumping where they are, the event wouldn’t even have to be a major one.  I think it’s likely oil prices hit record levels by early next year and ultimately potentially move toward $175-$200/b before policy makers are forced to abandon their idiotic policies.  As always, we shall see.

I’m off to Crested Butte for the weekend.

In peace and wisdom,

My Trip to Kingsbridge Road

I can calculate the movement of the stars, but not the madness of men.
– Isaac Newton

A brave man dies once, a coward a thousand times.
-African Proverb

The only way to deal with an unfree world is to become so absolutely free that your very existence is an act of rebellion.
-Albert Camus

A Chance Encounter with William A. Weber
In early February of this year, I was having a brutal day in the markets and, as I often do on such occasions, I stepped outside for a moment to get some fresh air and collect my thoughts.  Within moments along came an old man with a walker and a kind disposition.  I had noticed him around before, but we had never exchanged more than a friendly smile and a quick hello.  I am not always the most talkative person in the world when I don’t know someone (particularly if I am in a bad mood); however, for some reason I felt compelled to spark a conversation with this old man and he was more than happy to oblige.

I realized pretty quickly that I had come across someone special.  From the moment he started talking there was a light that shone from his eyes and an energy that radiated from his being that was simply unmistakable.  His name is William Weber, and as he described it, “I am 93 years young.”  He told me a little about his life.  He started off by telling me how he has worked at the University of Colorado at Boulder since 1946.  It was also in 1946 that he founded the University’s Herbarium.  Rather quickly, our conversation progressed into his background.  Like me he was born in New York City.  The only difference is he was born exactly 60 years before me, in 1918.  He told me about his days in The Kingsbridge Road section of the Bronx.  He then mentioned that he has been trying to find someone to take pictures of all the childhood places of his youth.  Coincidentally, I was set to travel to NYC the following week and so I volunteered to make the trip and take the photos for him.

My Trip to Kingsbridge Road
The first step was to get a list of the destinations.  He emailed me them rather quickly, and I must admit, I was a bit overwhelmed.  The list was longer than I thought, but the first item on the list immediately drew me in.  It was Edgar Allen Poe’s cottage, which William wrote “was a favorite place for me to visit, because of the raven that sat on the mantelpiece.”

As for me, I grew up in Midtown Manhattan.  My parents still live in the apartment I grew up in.  I went to high school in the Riverdale section of the Bronx, which is a quiet, tree-lined neighborhood in the northern section of the borough, nothing like what you would imagine an area of New York City to look like.  Let’s just say my familiarity with Kingsbridge Road was limited.

The Sunday afternoon that I decided to take the subway ride to Kingsbridge Road was cool and clear.  I debated whether or not it would be a good idea to bring my Nixon D90 SLR camera or not.  In the end, I decided to take it and if I felt unsafe I would just leave it in the carrying bag and take the pictures with my iPhone.  The subway ride felt pretty normal at first.  It was the same train you would take to go to Yankee Stadium.  However, as the stations passed by the crowd started to change as did the entire energy in the cars.  Gone were the last of the yuppies with the carefree looks on their faces.  In came the serious faces, the faces of people with serious problems.  People that have to scramble each and every day of their lives to survive.  The clothing was generally worn and cheap and the conversations I overheard were cryptic and heavy.

Once I got off the train I attempted to orient myself in what seemed like a strange land despite it being the city of my birth.  I quickly realized it would not be a great idea to take out my large camera and wear it around my neck everywhere.  This isn’t a popular tourist destination.  Once I was able to get my bearings, I started walking over to the Edgar Allen Poe cottage.  It was right along the Grand Concourse, which is a major thoroughfare.  I really started to grasp that the area I was in wasn’t as safe as the areas I normally frequent when I noticed the door was locked.  A few moments after ringing the bell a timid, gentle British man opened up the door and rushed me in.  He locked it back up behind me.  This was about 2pm.

The cottage tour was fun but I had places to go.  This is where things started getting a little tricky.  To get to the apartment he grew up in, the public school that he attended and the homes of relatives he wanted me to photo, I had to go into the heart of some neighborhoods rather than just hang around on near the main road.  Here, the streets weren’t crowded at all.  More importantly, there was a general heaviness that permeated the air.  In the neighborhoods I normally frequent, whether here in Colorado or in NYC, there is a general vibrancy to everyday life that emanates from the surroundings.  There was none of that apparent here.  People seemed beaten down and hopeless.  It was palpable and very depressing.  One other thing that stood out was the fact that there seemed to be brand new cars everywhere.  It seemed completely out of place with everything else I witnessed in the environment.  At first I wondered whether it was related to illicit activities, but I have since realized it is probably just a manifestation of all the subprime auto loans going around.

The rest of my journey went off without a hitch.  I was able to find and photograph pretty much every place he requested.  As it got later in the day, I recall really wanting to get out of there as soon as possible.  Particularly as the sun starting to grow lower on the horizon.  I felt really awful about what I had witnessed.  It wasn’t the material aspects of the neighborhood that affected me.  It was the depressed energy of the community.  It felt very third world.  It was extremely sad.

As I waited on the subway platform for my train home, I remember it seemed to take forever for it to arrive.  Once I got on and started back home I recall a huge sigh of relief.  What really got me though was exiting the subway station at Grand Central Station.  Walking out into the street with the gleaming Chrysler building shooting skyward made me feel a massive sense of wealth as well as modernity’s inescapable presence.  The contrast absolutely blew my mind, yet the place I had just been was only ten miles away and in the same city.  The city of my birth.  The city of William Weber’s birth.

Take the Journey for Yourself
I had considered writing about this journey several months ago, but I clearly never got around to it.  The reason that I decided to finally write about it was because I had the idea to recommend others take the same trip.  I know that many of my readers live in and around the NYC area, and so I request that you consider taking the time to retrace my steps one weekend.  I think you will find the thoughts and feelings that you experience on such a trip to be well worth it even if they aren’t the same as mine.

Furthermore, I wouldn’t dismiss taking the trip just because you have visited many “poorer” places.  So have I.  I have travelled extensively in Central and South America and my brother was in the Peace Corps in Guatemala.  When I visited him I stayed in his tiny village for a bit.  The key thing is that this is right in your backyard.  It’s a few hours.  Give it a shot.

I also would ask that those that do take the trip post their experiences in the comments section or send me an email.  I’d love to hear them.

So without further ado, here is the William Weber tour, in the words of the man himself:

My birthplace. When I was small, there was a hemlock forest in back of it. The Grand Concourse was the first street to the west. 2789 VALENTINE Ave. The apartment house where I was born, is on the west side of the street. 

Across the street from 2789 a small private house is sandwiched in between apartment houses. There is still a small garden plot in front which when I saw it some years ago, is now painted  red. One day when I was playing with Helen Wack, she accidentally pushed me off the stoop and I fell on my head on the concrete border. I got a depressed fracture which is still visible on my left forehead

The Edgar Allen Poe Cottage was a favorite place for me to visit, because of the raven that sat on the mantelpiece. It was or is at the junction of Fordham Road and the Grand Concourse.

P. S. 46   was a few blocks south of my home. I believe it was on Briggs Avenue which parallels Valentine.

My aunt’s house was a private house with a front porch, at 2665 Briggs Avenue. Josie was my favorite aunt, and I spent a lot of time devouring the magazines of natural history on the bookshelves of her living room

My father was a pharmacist. He worked at Atkins Drug Store, which was on 199th Street and Valentine. It had become a Latino food store when I last saw it.

Finally, here is a great story on William from a local paper that discusses how they have named the Herbarium after him.

Peace and Wisdom,