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It’s going to happen… because it already is happening and mathematically it had to and has to.  “It” being a complete breakdown of the financial system.  Look around the Western world and you will see sovereign nation after sovereign nation with debt to GDP ratios bloated and above 100% of GDPs.  This is unsustainable and can only last as long as interest rates remain low.  Do you really believe that interest rates will never ever rise again?  Please keep in mind that perversely, interest rates have been held down by central banks printing money (currency) out of thin air and using this money to purchase the bonds that the sovereign nation MUST sell in order to keep their doors open.

The fly in the ointment is Europe, or I should say Europe’s “structure.”  The fact that Spain, Italy, Portugal and the rest cannot “print” their way to pay debt service and issue new debt is the detonation device.  It is only a matter of time before another “Cyprus” emerges… only bigger, much bigger.  Investors and savers have been given a preview of what is to come and the politicians have tipped their hands by saying that Cyprus is the template going forward.  What I am getting at is that once any smoke at all starts coming out of a banking system or a sovereign debt market, investors will be very quick to react.  In reality what the Cyprus incident did was put investors and depositors on notice that “he who flees and panics first, panics best.”  The conditions for a global bank run have never been higher than they are right now!

I think we were seeing previews of this action in the (physical) precious metals markets during and after the Cyprus event which is what led the cartel to do what they did 2 weeks ago.  They were trying to tape a sign over the “exit” signs which led to the safe havens of silver and gold.  They tried to portray a situation that said “scary scary, do not go here.”  It has not worked and in fact has led to even more demand.  As I have said several times before, human nature is a funny duck and whenever one is told “you can’t have that” or “there is none available” people want it even more.  In effect they have compounded the problem of potential bank runs with the reality of a global run on the vaults.

You can easily see this, as both allocated and unallocated holders of gold are requesting the goods.  ABN Amro denying delivery to their customers is only the beginning and the huge movements (drawdowns) in COMEX (JPM) gold inventories are a huge flashing neon sign that something big is in the works.  You can smell it in the air; demand has exploded worldwide with no one saying that their demand has not at least doubled at a minimum since the Friday/Monday smack down.  Using common sense alone, the “smack down” happened for a reason.  I firmly believe that “the bottom of barrel” was in sight.  What has now been unleashed will merely speed up the end game’s arrival.

Even if I am wrong and this was not done to avert an imminent delivery default situation, what is now happening will surely lead to this.  Demand has outstripped supply for nearly 20 years now; the last 15 have seen at least a 1,500 ton per year supply/demand shortfall.  This means that over 20,000 tons had to “come from somewhere” …but where?  The answer has always been obvious to anyone thinking objectively.  The only caches of this size were held by central banks who still claim to hold 32,000 tons, laughable at best.  Rather than bite the bullet and allow a fiat collapse in terms of gold years ago, they have unloaded their national jewels to buy time.  The “time” is expiring now and we will soon see who has what and who doesn’t.  The one thing we do know is that gold has flowed East all this time…  and with it ultimately financial power.  Call what is about to be exposed a “run on the bank” or a “run on the vaults,” when all is said and done they are the same system wide.  We will soon find out who has what and who has squat!