…but that’s about all and probably not much. Stock markets at highs, precious metals under pressure and bond yields down, what more could you want to “show” that all is well across the land? Well, a couple of “humorous” pieces of news have surfaced beyond what we knew yesterday as to upcoming events that will best be viewed with a bowl of popcorn by your side. It turns out that Spain funded their own debt market the second half of last year by stuffing their equivalent of Social Security with their own sovereign debt. The pension now consists 97% of Spanish sovereign debt. SHOCKING until you look at our own plan which is basically 100% US Treasuries and Agencies. What could possibly go wrong here?
Then we heard from Japan last night (that little island that’s just “glowing” with economic activity). They announced a $1.4 trillion “printing/stimulus” package over the next two years. $1.4 TRILLION! Let me put this in perspective for you, this amount will first of all literally double their money supply in 2 years. It is not one $700 billion U.S. TARP plan. No, it’s TWO back to back from an island the size of New Jersey! But wait, let me REALLY put it into perspective for you. Do you know how much $1.4 trillion really is? At today’s price of gold, it is equal to 7 YEARS of GLOBAL PRODUCTION (what is it about this 7 years stuff? First Germany waits 7 years for their Gold, now Japan does a print job equal to 7 years of global production?).
Where oh where will the Bank of Japan eventually sell these radioactive securities in the marketplace? Especially with the whopping 1/2 of 1% interest that they are paying. AND after telling the world that their currency will be worth almost exactly 1/2 of what it’s “worth” now after doubling the money supply? Let me do a little crude math for you here, In 2 years the buyer of a ten year Samurai bond will earn a cumulative 1% in interest… the Yen will theoretically be worth 50% of what it is today if the money supply doubles as they promise, leaving the buyer with a 49% loss. In the words of “Ronco,” but wait there’s more! What happens if interest rates double to a whopping 1% in 2 years? Another 50% haircut leaving you with 24% of your original investment? Or what if the unthinkable happens and rates go to sky high levels like 2%? Another 50% haircut? I have to stop here because the math is getting just too hard for me… and you get the point anyway, they are announcing a devaluation of the Yen in massive terms.
So what to do? Well first off you should sell all of your gold because “it’s going down” and no one wants to lose money right? Which is exactly why it has been “going down.” (first a little sarcasm… gold has been going down in anticipation of this Japanese freak show? Maybe the news leaked out and someone wanted to front run getting out of gold first? …Sarcasm now off) The central banks KNOW and have KNOWN that the only way out is through confiscating assets. Either by stealing directly through bank accounts, pensions and the like, OR through inflation and devaluing currencies… which is why they are shaking the golden trees so hard right now. They know what is coming because THEY are going to do it, and have been doing it. They know that they must clean as many gold and silver assets up and off of the streets as they can… NOW and get them out of the hands of the people. Time is running out!
As to physical supply of metal, junk silver is very scarce with up to 5 weeks before delivery and the premiums are rising. The U.S. Mint ALONE sold more Silver Eagles in the last 3 months than all of the silver produced in the United States over that time! Southern India is experiencing gold shortages even after huge imports and I now have heard a story (I will try to verify) where Bangkok, Thailand is actually out of gold with at least 5 day wait lists and very small amounts allowed to even be ordered. The more they shake the tree apparently, the less “fruit” is becoming available because buyers of the real thing are doing what buyers always do. They are BUYING when their desired product goes on sale… ah the unintended consequences of a “centrally planned” global economy! As the saying goes, “They are of their own undoing.”