In the last article I posted - the excellent article by Bob Rinear, titled "Disaster - Dealing With It, published on the International Forecaster, I hope the readers keyed on Bob's rhetorical question: "Lets suppose we do get some form of economic implosion that takes down the economic infrastructure. A few weeks of no banks, no credit cards working, no ATM’s, no way to buy anything…. And it’s nation wide. It isn’t localized. How well would you fare?
Well? How well would you fare? While food stocks, water sources, the ability to protect yourself - meaning firearms, a defensive plan and above all a PLAN are all important, I certainly think that holding cash on hand, plus silver and gold bullion is a vital component of any plan.
I have compiled two very good articles below. The first is a series of questions for, and answers from the Deviant Investor, concerning gold and silver. I have only posted the Q&A dealing outside of market forces and that Wall Street mumbo jumbo. The Deviant Investor article was posted on 8 April 2014 and available in it's full length here.
Q: “I see nothing but trouble in the financial and political world. I see potential war in the Middle-East, in the Ukraine, in the South China Sea, and maybe elsewhere. I see morons in high places doing silly things. I see bankers printing their currencies to excess, as in uncharted territory excess, and I can’t see how this will end well for anyone, even the upper 1% of the political and financial elite. I want to buy gold and hunker down, but I also know that gold prices are manipulated, controlled, and capped, so why should I buy gold?”
A: I think it is important to remember that the powers-that-be (PTB) have been mismanaging the world for a long time, we are still here, the sun still shines, and gold has retained its value for several millennia. If the manipulation were overwhelmingly powerful, why is gold selling for about $1,300 instead of $300 like it was 12 years ago? The answer is, in my opinion, that the PTB know the dollar is going down and gold is going up, probably a long way up, but the PTB want to manage the dollar’s devaluation, not let the devaluation get out of hand, and they need to keep the game of financial musical chairs playing while they “get theirs.” Buy gold and ignore the daily, weekly, and monthly shenanigans in the markets.
Q: “I think silver is a better value than gold. I think gold is going up and silver is going up even more. I’m selling my gold and buying silver. What do you think of that plan?”
A: I think, as of today, silver will appreciate much more than gold and so you are probably correct. But things change, and I like the safety and security of gold also. Balance is good.
Q: “I’m putting my trust in God and my money in 3 month Treasuries. I think you should also. Go ahead, admit it, you are a bit jealous.”
A: I’ll pass on the Treasuries. I’m not jealous. I put my faith and trust in God and Gold. It works for many people.
And another good (but long) article from Gold Silver Worlds titled: "Monetary Insurance: Protect With Physical Silver Against The Financial Winter."
UrbanMan's note: I would have replaced the words Financial Winter with Financial Collapse.
As part of our research to unveil the best tactics and strategies to protect against the upcoming tsunami in monetary and financial markets, we have reached out to Charles Savoie, author and researcher, with a tremendous knowledge of precious metals history. Our question was how individuals and small investors can best protect during the hard times that are coming, which will most likely be characterized as turmoil and collapses (of all sorts of assets, including currencies, around the world).
Charles Savoie wrote a very useful document for our readers. It is entitled “The Best Monetary Insurance”, counts 38 pages, and is a mix of practical tips embedded in an historical context. The key message of Mr. Savoie is to hold enough silver in physical form, ideally a mix of formats, but for sure silver dimes.
In this article, we highlight the most actionable tips and tactics. The full document is embedded at the bottom, it can also be downloaded.
Visit Mr. Savoie his two websites: www.nosilvernationalization.org and www.silverstealers.net. He offers all this information as a free service to the public.
Silver has historically played an important role. It has been money, but, more than anything else, a metal of the elites. Consider this:
U.S. Congress knew silver to be more valuable in regard to gold than the present bullion banking fiends. And Congress knew it nine generations ago! For details, see Senate document number 67 of the first session of the 73rd Congress, “Elementary Facts Bearing On The Silver Question” by Joel F. Vaile” (50 page document, 1896). Today the reality ratio of silver to gold may have fallen to 9, due to depletion of minable silver (The U.S. Geological Survey concurs) and even more so, the evanescence of above surface inventories. Ratios of silver to gold such as the approximate 64 to 1 of late March 2014 are illusory. But the real impact is that silver is a better buy than gold.
The best monetary insurance you can have is 90% silver dimes 1964 and earlier. Many gold bugs readily admit silver to be more depressed than gold. Ted Butler stated long ago that not even gold has a users association. The fact of the existence of this group is another of many proofs that synthetic money creators hate and fear silver even more than their loathing for gold. The Silver Users Association started out as the Silver Users Emergency Committee in World War II and in 1947 was renamed the Silver Users Association. Directors of SUA companies, especially the biggest silver users, are also since that time, directors of megabanks. 90% U.S. coins, historic money, facilitated many billions of transactions during their long history spanning many generations. Inasmuch as silver is so depressed relative to gold, personally, I advocate owning little or no gold; unless the investor cannot acquire silver. This is not disdain for gold, but more so, advocacy for acquiring the interest with higher potential. Silver can be swapped for gold at a later time if the ratio tilts to overvalue silver versus gold. Why buy 1 ounce of gold today versus 60+ silver ounces, when you may be able later on to swap those 60 + silver ounces for over 5 gold ounces?
UrbanMan's Comment: 90% silver coins are good to have but only part of the equation. I would also recommend silver bullion - i.e...one once silver rounds as well as some smaller denomination gold coins such as 1/10th and 1/4th ounce gold bullion coins.
A silver dime at the mints started out with a content of .0723 oz silver (4 digits is enough!) Due to average circulated wear, the business typically uses the figure of .0715 ounce contained silver. You will be able to tell the difference from a dime with no wear and a dime with light wear and more so, a heavily worn dime. I feel that very worn dimes are better melted, except for collectors seeking an inexpensive “cull” or “filler” coin for a key date and mint mark. When you buy dimes, you’re unlikely to get any with 89.24% silver, which were minted from 1796 to 1837. The clear advantage of Mercury dimes over Roosevelt is guaranteed identification of purity with no check of the date nor glance at the rim to look for telltale copper insides. Silver coins have a surprisingly large variation in surface tone, and you can’t always rely on telling the surface tone of a cupronickel (sandwich dime, 1965 and later) from a silver dime. Of course, proof silver dimes (1992-2009) can be found in dates beyond the fabled 1964 date. These are good buys generally only if you chance to come by some in a batch of mixed date dimes, in which case, they won’t be proof anymore, but will very likely stand way out due to newness and absence of wear.
I am not saying buy silver dimes, and no other silver. I have all types except the 1,000 ounce ingots, which you can anticipate having to have assayed if you have these and decide to sell. Unless you’re a larger investor and have intentions of using metal to buy land, stick with smaller units. Having smaller units wouldn’t preclude their use in buying land; smaller units are more “maneuverable” as to utility in purchases.
If dimes aren’t available, try for quarters. It mostly comes down to two considerations. One, the 90% coins haven’t been minted now for an entire half century—they get scarcer by the day, as some of these are always being smelted into bullion with silver scrap at refineries, and being melted in jewelers crucibles with some three-niner, in a proportion to yield .925 Sterling jewelry and Two, the silver dime is the most divisible, or the most fractionated, form of silver. You can go buy a 100 ounce silver bar. However, you can instead go for the same amount of silver, approximately, in 90% dimes. This equates to almost exactly 1,400 dimes (28 rolls of 50 coins) at the .0715 figure. In most cases, dealers have allowed me to cherry pick the dimes I wanted and the methodology I used was as follows.
Tip: Avoid damaged coins
Never buy coins with damage such as hole drilled, bent, clipped, etched (vandalized) or shaved rims. There’s the inevitable coin with red nail polish, best avoided. While date and mint mark checking is usually only practical in over the counter situations, and is unlikely to turn up anything of outstanding scarcity, it could help you in terms of being able to assemble some starter sets for sale to numismatic collectors. So while you aren’t paying numismatic prices, you will be getting some numismatic values, as long as people want to collect coin series as a hobby or business. It pays to print out a list of these mint issues and be familiar with them.
Tip: Avoid high premiums
You can buy .999 silver as half, quarter, and tenth of an ounce rounds. There is nothing wrong with these items. However, know two things—the collectible value will remain less, and when you buy 90% coin, you aren’t paying for any manufacturing or minting premium. You will pay such premiums with the smaller three-niners. Seven dimes in nearly all cases can be considered a touch more than a half ounce of silver; and 14 dimes a full ounce. In terms of how much silver is out there as separate items each weighing less than one ounce, definitely at this time, there is more 90% coin than these newer bullion items.
If your silver consists entirely of three and four-niner bullion—stop! Buy some dimes, or trade bullion for some dimes. These 90% coins—in all denominations—are increasingly hard to source. More investors have caught on that whereas these coins are a half century and older, and the supply is constantly shrinking; bullion silver will be produced as long as mining and scrap can supply silver. The 90% silver, though not industrially pure as is, is nonetheless the scarcer form of silver. If buying on E-Bay, do avoid dealers with less than very high positive feedback. Be fairly quiet about your holdings—no boasting to anyone. Keep these precious items in several scattered, and unpredictable—locations. If a thief finds one cache, hopefully the others will be missed.
Tip: Where and how to store your bullion
If you don’t have a vault or safe, and plan to obtain one, you may consider paying cash, for clear reasons you can imagine yourself. If it needs to be delivered and installed, arrange to have someone photograph the delivery personnel and the vehicle, from several views. When my vaults were delivered to an off-site location I have, I remarked as they were finishing, “Now if I only had something worthwhile to store in them;” I then indicated I expected to inherit an antique gun collection in several years. It never hurts to be careful. Read “The Art Of War” by Sun-Tzu. Many major military blunders, costing so many lives. As always, check ratings first, and buy from the source with the best ratings.
There’s always the steel vault and loaded gun approach—which are quite reasonable. I advise going on EBay and buying some cheap synthetic rubies. Then, you make up a phony gemological appraisal showing a stone is worth lots of money. Next, you place these in a jewelry box (unlocked) on top of a dresser. A thief would think he’s got a real haul, and maybe decide to stop searching. I suggest printing out articles making fun of silver as investment, and leaving these where you think it might mislead someone. If you use a keypad operated vault, consider acquiring a solar battery recharger and in case the power grid fails and the stores close. If you find your battery operated keypad fails due to battery exhaustion, this device will solve the problem of accessing your money metal. Be sure you’re using compatible batteries in the first place; they must be a size that matches the recharger, and must be rechargeable batteries. Keep backup batteries in a climate controlled environment where they’ll last longer. Cover any vault/safe with a tarp or other use of drapery, such as a decorative item—even a Mexican style multicolored serape or even plain canvas. Whenever possible, place any type of objects of low value on top, around and in front of the safe.
Tip: Check what you are buying
Never buy a bag, half bag, quarter bag or tenth of a bag in a shop without first having it opened up and spread out, unless you have a long trust relationship with the dealer. Paper rolls, more than plastic tube rolls, should be checked. You aren’t accusing the dealer of dishonesty, you are verifying contents, because errors can happen on anyone’s part. Eventually, due to real variations in silver weight in bags, these will have to be sold by actual weight rather than by face value times a factor! Check ratings of Internet sellers before buying. Many unfortunates out there are stressed out due to the Tulving fiasco. I consider the 40% Kennedy halves (1965-1970) a poor choice as long as 90% is available. The war nickel series, 1942-1945, contains even less silver, at 35% but is a better buy, weight for weight, if similar rates for contained silver are offered. Those nickels are more historic.
In closing, Charles Savoie says: “The suppression of the silver price is the most nagging and pestilential problem in world monetary history.”
Showing posts with label prepare for financial armageddon. Show all posts
Showing posts with label prepare for financial armageddon. Show all posts
Tuesday, April 22, 2014
Friday, December 27, 2013
Wall Street Advisor Advocates Survival Prepping
A top financial advisor, worried that Obamacare, the NSA spying scandal and
spiraling national debt is increasing the chances for a fiscal and social
disaster, is recommending that Americans prepare a “bug-out bag” that includes
food, a gun and ammo to help them stay alive.
David John Marotta, a Wall Street expert and financial advisor and Forbes contributor, in a article to investors titled "Be prepared: Wall Street advisor recommends guns, ammo for protection in collapse" said that Firearms are the last item on the list, but they are on the list. There are some terrible people in this world. And you are safer when your trusted neighbors have firearms.”
His memo is part of a series addressing the potential for a “financial apocalypse.” His view, however, is that the problems plaguing the country won't result in armageddon. “There is the possibility of a precipitous decline, although a long and drawn out malaise is much more likely,” said the Charlottesville, Va.-based president of Marotta Wealth Management.
UrbanMan's comment: I think it is more likely for the economic collapse to come on gradually. In fact, I think it has already started.
Marotta said that many clients fear an end-of-the-world scenario. He doesn’t agree with that outcome, but does with much of what has people worried.
“I, along with many other economists, agree with many of the concerns expressed in these dire warnings. The growing debt and deficit spending is a tax on those holding dollars. The devaluation in the U.S. dollar risks the dollar's status as the reserve currency of the world. Obamacare was the worst legislation in the past 75 years. Socialism is on the rise and the NSA really is abrogating vast portions of the Constitution. I don't disagree with their concerns,” he wrote.
In his latest note, he said that Americans should have a survival kit to take in case of a financial or natural disaster. It should be filled with items that will help them stay alive for the first 72-hours of a crisis, including firearms.
“A bug-out bag is a good idea depending on where you live even if the emergency is just power outages, earthquakes and hurricanes. And with your preparedness you will be equipped to help others who might be in need,” he wrote. “Be prepared. Especially because it keeps you from being scared.”
Marotta provides a list of items on his website, with a desription of, and recommended Bug Out Bag items straight from Wikipedia.
The suggested contents of a bug-out bag vary, but most of the following are usually included:
• Enough food and water to last for 72 hours. This includes: Water for washing, drinking and cooking. Canada recommends 2 litres per person per day for drinking plus an additional 2 litres per person per day for cleaning and hygiene. In addition to 6litres/6kg of water for personal hygiene for 3 days the Canadian government also recommends carrying a portable shower, nail clippers, hairbrush, cosmetics, shaving gear or beard trimmer (if electric then carry a portable generator and petrol), shampoo, deodorant, acne cream, incontinence pads, a dinner suit/gown (you never know what will happen on your adventure, it could be quite exciting, maybe a new romance).
Forget trying to walk, you'll need a car because your survival backpack will be too heavy to carry. Have a nice disaster. New Zealand recommends 3 litres per person per day for drinking. US recommends 1 gallon (3.78 litres) per person per day.
• Non-perishable food
• Water purification supplies
• Cooking supplies
• A first aid kit
• Fire starting tool (e.g., matches, ferrocerium rod, lighter, 9volt battery, etc.)
• A disaster plan including location of emergency centers, rallying points, possible evacuation routes, etc.
• Professional emergency literature explaining what to do in various types of disaster, studied and understood before the actual disaster but kept for reference
• Maps and travel information •Standard camping equipment, including sanitation supplies
• Weather appropriate clothing (e.g., poncho, headwear, gloves, etc.)
• Bedding items such as sleeping bags and blankets
• Enough medicine to last an extended evacuation period
• Medical records
• Pet, child, and elderly care needs
• Battery or crank-operated radio
• Lighting (battery or crank operated flashlight, glow sticks)
• Cash and change, as electronic banking transactions may not be available during the initial period following an emergency or evacuation
• Positive identification, such as drivers license, state I.D. card, or social security card
• Birth certificate or passport
• Fixed-blade and folding knife
• Duct tape and rope or paracord
• Plastic tarps for shelter and water collection
• Wire for binding and animal traps
• Compass Some users include the following.
These items are appropriate and legal in some areas:
• Slingshot, pellet gun, blowgun or other small game hunting equipment
• Firearms and appropriate ammunition
UrbanMan's comment: Then just when you think this guy is providing some decent type of service to people who are pretty clueles about Survival and Preping, Marotta say's this:
Just to be clear. Firearms are the last item on the list, but they are on the list. There are some terrible people in this world. And you are safer when your trusted neighbors have firearms . But in most disasters, including I suspect TEOTWAWKI, most people you meet will be civil.
UrbanMan's comment: Yep!! I'm banking on people being civil, listening to reason, not trying to take what I have,....and I rely on my neighbors to protect me and my family. NOT!!
David John Marotta, a Wall Street expert and financial advisor and Forbes contributor, in a article to investors titled "Be prepared: Wall Street advisor recommends guns, ammo for protection in collapse" said that Firearms are the last item on the list, but they are on the list. There are some terrible people in this world. And you are safer when your trusted neighbors have firearms.”
His memo is part of a series addressing the potential for a “financial apocalypse.” His view, however, is that the problems plaguing the country won't result in armageddon. “There is the possibility of a precipitous decline, although a long and drawn out malaise is much more likely,” said the Charlottesville, Va.-based president of Marotta Wealth Management.
UrbanMan's comment: I think it is more likely for the economic collapse to come on gradually. In fact, I think it has already started.
Marotta said that many clients fear an end-of-the-world scenario. He doesn’t agree with that outcome, but does with much of what has people worried.
“I, along with many other economists, agree with many of the concerns expressed in these dire warnings. The growing debt and deficit spending is a tax on those holding dollars. The devaluation in the U.S. dollar risks the dollar's status as the reserve currency of the world. Obamacare was the worst legislation in the past 75 years. Socialism is on the rise and the NSA really is abrogating vast portions of the Constitution. I don't disagree with their concerns,” he wrote.
In his latest note, he said that Americans should have a survival kit to take in case of a financial or natural disaster. It should be filled with items that will help them stay alive for the first 72-hours of a crisis, including firearms.
“A bug-out bag is a good idea depending on where you live even if the emergency is just power outages, earthquakes and hurricanes. And with your preparedness you will be equipped to help others who might be in need,” he wrote. “Be prepared. Especially because it keeps you from being scared.”
Marotta provides a list of items on his website, with a desription of, and recommended Bug Out Bag items straight from Wikipedia.
The suggested contents of a bug-out bag vary, but most of the following are usually included:
• Enough food and water to last for 72 hours. This includes: Water for washing, drinking and cooking. Canada recommends 2 litres per person per day for drinking plus an additional 2 litres per person per day for cleaning and hygiene. In addition to 6litres/6kg of water for personal hygiene for 3 days the Canadian government also recommends carrying a portable shower, nail clippers, hairbrush, cosmetics, shaving gear or beard trimmer (if electric then carry a portable generator and petrol), shampoo, deodorant, acne cream, incontinence pads, a dinner suit/gown (you never know what will happen on your adventure, it could be quite exciting, maybe a new romance).
Forget trying to walk, you'll need a car because your survival backpack will be too heavy to carry. Have a nice disaster. New Zealand recommends 3 litres per person per day for drinking. US recommends 1 gallon (3.78 litres) per person per day.
• Non-perishable food
• Water purification supplies
• Cooking supplies
• A first aid kit
• Fire starting tool (e.g., matches, ferrocerium rod, lighter, 9volt battery, etc.)
• A disaster plan including location of emergency centers, rallying points, possible evacuation routes, etc.
• Professional emergency literature explaining what to do in various types of disaster, studied and understood before the actual disaster but kept for reference
• Maps and travel information •Standard camping equipment, including sanitation supplies
• Weather appropriate clothing (e.g., poncho, headwear, gloves, etc.)
• Bedding items such as sleeping bags and blankets
• Enough medicine to last an extended evacuation period
• Medical records
• Pet, child, and elderly care needs
• Battery or crank-operated radio
• Lighting (battery or crank operated flashlight, glow sticks)
• Cash and change, as electronic banking transactions may not be available during the initial period following an emergency or evacuation
• Positive identification, such as drivers license, state I.D. card, or social security card
• Birth certificate or passport
• Fixed-blade and folding knife
• Duct tape and rope or paracord
• Plastic tarps for shelter and water collection
• Wire for binding and animal traps
• Compass Some users include the following.
These items are appropriate and legal in some areas:
• Slingshot, pellet gun, blowgun or other small game hunting equipment
• Firearms and appropriate ammunition
UrbanMan's comment: Then just when you think this guy is providing some decent type of service to people who are pretty clueles about Survival and Preping, Marotta say's this:
Just to be clear. Firearms are the last item on the list, but they are on the list. There are some terrible people in this world. And you are safer when your trusted neighbors have firearms . But in most disasters, including I suspect TEOTWAWKI, most people you meet will be civil.
UrbanMan's comment: Yep!! I'm banking on people being civil, listening to reason, not trying to take what I have,....and I rely on my neighbors to protect me and my family. NOT!!
Saturday, March 2, 2013
How the Collapse of the Dollar Could Occur
US Dollar Collapse? Here Are 9 Ways It Could Happen, by Chris Ferreira on Economic Reason.com, which defines nine ways the dollar collapse could occur. He is spot on concerning the slow, gradual decline until a major event triggers the collapse. Until then most people will be fooling themselves, thinking market correction, chances to buy cheap and sell high, until it becomes apparent that there are other things more important than their financial holdings,....and those things of course are the ability to feed yourself and your family,.....and the ability to protect the same.
We all know that the US dollar is losing value through inflation every year; in fact, the dollar has lost over 97% of its purchasing power over the last century. When “real money” (i.e. backed up with intrinsic value) was used, a cup of coffee in the 1920s costed about a few cents. In a fiat world, where money’s value is ambiguous, a cup of coffee can cost upward to a 100 trillion dollars, as was the case in Zimbabwe in recent times. Just how much more can the remaining 3% be debased from the US dollar, and how fast can it happen?
A slow, gradual decline can occur without any one person ever even noticing the effects– until, that is, a “black swan”event comes along and triggers the psychology of investors to quickly reverse their thinking, and here a collapse can literally happen overnight. A “black swan,” a term coined by Nassim Nicholas Taleb in his bestselling book The Black Swan, is “an event, positive or negative, that is deemed improbable yet causes massive consequences.” In his book he describes the psychology biases that makes people individually and collectively blind to a rare event. He also notes that the more complex a system is, the more prone it is to failure as there is more room for glitches and errors. This analogy can be used to describe the complexity of the US global empire, complete with its massive debt and 900 military bases around the world. This article is taking a “black swan” approach to the US dollar.
Here are nine events that could trigger a black swan event that would result in a US dollar collapse. The reasons below are not in order of importance, and all them can prove to be negative for the US dollar.
1. The Fed Chooses to engage in currency wars by being the spender of last resort and printing money to oblivion. When people think of a collapse, they often think of a deflationary setting. But a collapse can also occur when the face value of the currency goes up–or skyrockets upwards, as did the currency in Zimbabwe, when everyone was suddenly eligible to be a “trillionaire.” (Webster needs to update their dictionary with this word). When the face value of a currency skyrockets, the purchasing power decreases, and these are usually the ingredients for hyperinflation and collapse.
It took the US 200 years to issue $3 trillion dollar in M3 money supply. Greenspan increased this to $10 trillion dollars in his eighteenth year as Fed chairman. How much has it increased under Ben Bernanke, in his seven years as chairman of the Fed? Your guess is as good as mine, actually, because the exact number is unknown: the Fed no longer reports this statistic as of 2006, exactly when Bernanke entered office. What a coincidence!
With QE 3 and QE 4, the Fed now prints a total of $85 billion a month, most of which is reportedly being held in reserves. Even with these rock bottom low interest rates, credit demand is weak. There is plainly too much uncertainty.
If the stock market were to crash again as it did in 2008, and the Fed were to consequently launch QE5, then QE6 and so on… This would hardly be, in reality, a “black swan” event since it is probable, but nevertheless, it could eventually lead to hyper-inflation and a total collapse of the dollar, where people would lose purchasing power of the dollar as in the case of Zimbabwe. This is more likely to occur if the US dollar also loses its reserve currency status.
2. The Fed’s printing press “jams” and ceases to stops printing money. As I’ve stated before, the Fed will most likely not stop printing money. During the December 2012. FOMC meeting, this belief was supported. The most important reason why the Fed needs to continue printing money is so that it can hold interest rates artificially low to stimulate the economy. Normally, higher interest rates would increase the value of the dollar, as this would cause people to deleverage from investments and increase the demand for dollars. However, the structural imbalances the economy has undertaken from a decade of artificial low interest rates would implode the economy from high interest rates now. Undoubtedly, if the Fed stops printing money, this will mostly cause higher interest rates. This will lead to increased bankruptcies, higher unemployment, more foreclosures, lower tax revenue for the US government, and increased interest on the national debt. In this situation it could lead to the bankruptcy of the US as they could default on their own debt.
Interest rates in the 80′s were increased signficantly to kill inflation, however the US debt was nowhere near what it is today (even in terms of % of GDP). At the present moment, the US is paying over $1 billion a day just in interest payments to service its debt. A slight increase in interest rates would significantly increase these payments and leave the US with even more debt than it already has, increasing their trillion dollar per year deficits. This is a scenario whereby the US could default just as Argentina did in the early 2000′s.
If they were to stop printing money, the Fed could trigger a dollar collapse, especially if foreigners decide to no longer lend the US any more money, and start dumping US debt from their foreign reserves.
3. Rise of “Gotham City” and the Vigilantes. We know that the US is currently the largest debtor nation in the history of the world, operating on yearly trillion dollar deficits. What if the US citizens were to “wake up” and collectively stop paying their taxes? What if they were to collectively choose to no longer support political decisions that serve to perpetually increase the debt? An increase in debt ruins the prospects for future generations, after all. Taxes are essentially the life-line of any government. A cut on this life-line is like cutting the main artery to the heart. Without a tax base, government can no longer pay its bills.
A significant internal revolution by citizens would entail a collective refusal against the paying of taxes and the continual raising of the debt ceiling. Perhaps these citizens might even become bond vigilantes and sell US bonds, especially if other countries became US bond vigilantes and sell their US bonds, as well. This would likely collapse the dollar, and send the US dollar into hyper-inflation.
4. China, the largest financier of the US debt, drops the debt bomb. The Chinese can drop the debt bomb on the US just by selling a fraction of their US treasury holdings. As of June 2012, the Chinese owned $1.16 trillion in US debt (US government treasury bonds). Japan owns $1.11 trillion and the OPEC nations, $261 billion. In the last few years, China has been lowering their purchases of US debt and replacing it with other assets. To circumvent this problem, the Fed of late has been stepping in to purchase treasury bonds to make up for the lost demand of the foreigners.
China’s power is the direct result of the symbiotic trade relationship with the US. The US buys goods from China in US dollars, and China ships them the products and uses the US dollar surpluses to buy US debt, among other assets.
It may not be in the interest of China to drop the debt bomb, but it definitely has the power to do it. If this is the case, there would be so much US debt on the market that other US debt holding countries could also throw their debt on the market as well as a result of panic and fear. Triggering an international run on US debt. The US Dollar will surely collapse in this scenario.
5. China, Japan, Russia, Iran, Germany, Brazil, Australia, Chile, UAE, India, and South Africa are bypassing the dollar and creating bi-lateral trade warfare.
What if now the Chinese, instead of dropping the debt bomb, create enough bi-lateral trade agreements to avoid the US dollar altogether with foreigners? In fact China, among other countries, has already done this by trading with the Chinese Yuan instead of the US dollar. If China, Japan, Russian, Iran, Germany, Brazil, Australia, Chile, USE, India, and South Africa would continue to do so, other larger countries may follow suit and before you know it, the majority of trade would be transacted in non-US dollars. At this point, the US dollar would no longer be needed, and its world reserve currency status would collapse along with its purchasing power.
What could also trigger a large decline in the US dollar would be if a relatively large oil-producing country (like Saudi Arabia) refuses to use the US dollar to sell its oil, choosing instead something more tangible (like gold). William R. Clark’s excellent book, Petrodollar Warfare, treats this issue precisely, going in depth into the Petrodollar collapse and how the US maintains its dollar supremacy with its current imperialistic foreign policy. If a major OPEC nation refuses to sell its oil in US dollars, this could result in a total loss of confidence in the US dollar, precipitating its collapse.
6. “Good-bye Dollar, Hello SDR!” The U.N. and IMF implement a New World Reserve Currency George Soros states in a recent video interview (see here) that the US needs a “New Financial World Order,” on the pretext that the current system is “broke” and creating huge trade imbalances. The Guardian stated the following:
“The International Monetary Fund warned that the colossal United States trade deficit was a noose around the neck of the economy, emphasizing that the once mighty dollar could collapse at any moment.”
Soros, a member of the Bretton Woods Committee–the same institution that created the IMF–is now promoting the Special Drawings Right (SDR) as a potential new world currency.
The progress for the SDR has been very slow and has not received much acceptance among other nations. However, note that the US currently controls the IMF by its voting powers (17% nominal interest, and a required of 85% majority for decisions). As more and more people lose confidence in the US dollar in general due to reckless monetary and fiscal policies, the IMF can instead back the SDR with gold to promote stability and confidence. That is certainly one realistic possibility considering that they reportedly own over 2,800 tons of gold. A shift in reserve currency from the US dollar to the SDR or other another currency would undoubtedly collapse the US dollar. It’s trade imbalance is sustained by it’s reserve status.
7. A “too-big-to-fail” corporation fails: A derivative shock-wave. The Financial Stability Board (FSB) released a list of 29 “too big to fail” corporations operating around the world. According to the FSB, these banks are considered to be “systemically important financial institutions” and a failure of any one of these corporations could result in “financial systemic failure.” Of the 29 corporations on the list, 17 are based in Europe, eight in the U.S., and four in Asia.
Bank of America
Bank of China
Bank of New York Mellon
Banque Populaire CdE
Barclays
BNP Paribas
Citigroup
Commerzbank
Credit Suisse
Deutsche Bank
Goldman Sachs
Group Crédit Agricole
HSBC
ING Bank
JPMorgan Chase
Lloyds Banking Group
Mitsubishi UFJ FG
Mizuho FG
Morgan Stanley
Nordea
Royal Bank of Scotland
Santander
Société Générale
State Street
Sumitomo Mitsui FG
UBS
Unicredit Group
Wells Fargo
A failure of any one of these banks, but especially one in the US, could create a bank run, further destroying the ability to provide credit and increasing the likelihood of a dollar collapse.
What is most likely to create a bank failure is a derivative failure. Actually, a current derivatives scandal is threatening to take down the world’s oldest bank:
“Banca Monte dei Paschi di Siena, the world’s oldest bank, was making loans when Michelangelo and Leonardo da Vinci were young men and before Columbus sailed to the New World. The bank survived the Italian War, which saw Siena’s surrender to Spain in 1555, the Napoleonic campaign, the Second World War and assorted bouts of plague and poverty.
But MPS may not survive the twin threats of a gruesomely expensive takeover gone bad and a derivatives scandal that may result in legal action against the bank’s former executives. After five centuries of independence, MPS may have to be nationalized as its losses soar and its value sinks.”
The precise, total amount of global derivatives in the market is not exactly known, but estimates range from 650 trillion to 1.5 quadrillion dollars. This amount dwarfs the world’s GDP at approximately $70 trillion. (Refer to this article to see what $16 trillion looks like.) It is no wonder why Warren Buffet calls derivatives the “financial weapons of mass destruction.”
According to the Controller of Currency and National Banks, here are the stats for the following banks as of September 2012:
JPMorgan Chase
Total Assets: $1.85 trillion dollars
Total Exposure To Derivatives: $71.07 trillion dollars
Citibank
Total Assets: $1.365 trillion dollars
Total Exposure To Derivatives: $55.51 trillion dollars
Bank Of America
Total Assets: $1.448 trillion dollars
Total Exposure To Derivatives: $43.79 trillion dollars
Goldman Sachs
Total Assets: $120.43 billion (not trillion)
Total Exposure To Derivatives: $41,23 trillion
Note that JP Morgan alone has more derivative exposure than the world’s GDP. A derivative collapse is definitely an event that could take down the whole financial system and collapse the US dollar. 8. A run on the gold and silver bullion exchanges. Andrew McGuire, a former Goldman Sachs trader, disclosed that the London bullion Market Association (LBMA) trades on a net basis each year of $5.4 trillion dollars, a little less than half the size of the US economy. The LBMA is the biggest gold commodity market in the world.
But how can the LBMA do this be when the gold market is such a tiny market? The world production of gold is about 2,500 metric tons of gold (88,184,905 oz) which at today’s price of $1,667 is approximately $147 billion in yearly production value.
The LBMA is the equivalent of a fractional reserve system in that it is leveraged 100 to 1. For every ounce of real gold that is sold, 100 ounces of paper gold is sold, meaning there are 100 claims on each and every ounce of gold. These numbers were verified by Jeffrey Christian, a gold expert and founder of CMP Group (a commodities research, consulting, investment banking, and asset management company). The leverage is absurd.
The LBMA can be compared with other exchanges. The world’s gold market is backed up by approximately 2.3% of real gold. If a mere 2.5% of people would start demanding their gold, the physical gold market would explode, subsequently crushing the dollar, as the value of the dollar is inversely proportional to the price of gold.
Hedge fund manager Kyle Bass pointed out that the New York Comex has only approximately 3% of the bullion on hand to cover future contracts positions. and this game will continue if people do not demand delivery of their gold. The emperor has no clothes!
9. A central bank gold rush and foreign gold repatriation from the Fed – Gold Audit Venezuela has actually just recently received their last shipment of gold bars from the US.
“This was the largest type of operation to transport this type of metal in the last fifteen years,” said Merentes. “The repatriation of our gold was an act of financial prudence and sovereignty.” (Bloomberg)
The Germans and the Dutch have also recently requested their gold to be repatriated from the US. However, unlike Venezuela, Germany was told to wait seven years to get their gold back. That sounds odd, right?
Now the Swiss, under their recently launched Swiss Initiative to Secure the Swiss National Bank’s Gold Reserves, are hinting that they might want to get their gold back on Swiss soil. The Swiss government has a long standing tradition of backing their currency with gold.
This gold repatriation is turning out to be much bigger than a political statement. It is a total non-compliant/non-confidence vote for the US and the US dollar.
Which country is next? Mexico? They have 96% of their gold stored in the US and London.
A central bank gold rush to repatriate a country’s gold from the US can cause a huge upward demand for gold, pushing the price of gold upward and crushing the US dollar. (Especially if the Fed doesn’t have their gold and has been leased out into the market).
We have just gone through nine black swan events–events, remember, that are highly improbable but yet, when they do happen, have massive consequences.
Chris Ferrerra promises a Part 2 of this article, which he will go through five other “black swan” events that could cause the US dollar to collapse.
We all know that the US dollar is losing value through inflation every year; in fact, the dollar has lost over 97% of its purchasing power over the last century. When “real money” (i.e. backed up with intrinsic value) was used, a cup of coffee in the 1920s costed about a few cents. In a fiat world, where money’s value is ambiguous, a cup of coffee can cost upward to a 100 trillion dollars, as was the case in Zimbabwe in recent times. Just how much more can the remaining 3% be debased from the US dollar, and how fast can it happen?
A slow, gradual decline can occur without any one person ever even noticing the effects– until, that is, a “black swan”event comes along and triggers the psychology of investors to quickly reverse their thinking, and here a collapse can literally happen overnight. A “black swan,” a term coined by Nassim Nicholas Taleb in his bestselling book The Black Swan, is “an event, positive or negative, that is deemed improbable yet causes massive consequences.” In his book he describes the psychology biases that makes people individually and collectively blind to a rare event. He also notes that the more complex a system is, the more prone it is to failure as there is more room for glitches and errors. This analogy can be used to describe the complexity of the US global empire, complete with its massive debt and 900 military bases around the world. This article is taking a “black swan” approach to the US dollar.
Here are nine events that could trigger a black swan event that would result in a US dollar collapse. The reasons below are not in order of importance, and all them can prove to be negative for the US dollar.
1. The Fed Chooses to engage in currency wars by being the spender of last resort and printing money to oblivion. When people think of a collapse, they often think of a deflationary setting. But a collapse can also occur when the face value of the currency goes up–or skyrockets upwards, as did the currency in Zimbabwe, when everyone was suddenly eligible to be a “trillionaire.” (Webster needs to update their dictionary with this word). When the face value of a currency skyrockets, the purchasing power decreases, and these are usually the ingredients for hyperinflation and collapse.
It took the US 200 years to issue $3 trillion dollar in M3 money supply. Greenspan increased this to $10 trillion dollars in his eighteenth year as Fed chairman. How much has it increased under Ben Bernanke, in his seven years as chairman of the Fed? Your guess is as good as mine, actually, because the exact number is unknown: the Fed no longer reports this statistic as of 2006, exactly when Bernanke entered office. What a coincidence!
With QE 3 and QE 4, the Fed now prints a total of $85 billion a month, most of which is reportedly being held in reserves. Even with these rock bottom low interest rates, credit demand is weak. There is plainly too much uncertainty.
If the stock market were to crash again as it did in 2008, and the Fed were to consequently launch QE5, then QE6 and so on… This would hardly be, in reality, a “black swan” event since it is probable, but nevertheless, it could eventually lead to hyper-inflation and a total collapse of the dollar, where people would lose purchasing power of the dollar as in the case of Zimbabwe. This is more likely to occur if the US dollar also loses its reserve currency status.
2. The Fed’s printing press “jams” and ceases to stops printing money. As I’ve stated before, the Fed will most likely not stop printing money. During the December 2012. FOMC meeting, this belief was supported. The most important reason why the Fed needs to continue printing money is so that it can hold interest rates artificially low to stimulate the economy. Normally, higher interest rates would increase the value of the dollar, as this would cause people to deleverage from investments and increase the demand for dollars. However, the structural imbalances the economy has undertaken from a decade of artificial low interest rates would implode the economy from high interest rates now. Undoubtedly, if the Fed stops printing money, this will mostly cause higher interest rates. This will lead to increased bankruptcies, higher unemployment, more foreclosures, lower tax revenue for the US government, and increased interest on the national debt. In this situation it could lead to the bankruptcy of the US as they could default on their own debt.
Interest rates in the 80′s were increased signficantly to kill inflation, however the US debt was nowhere near what it is today (even in terms of % of GDP). At the present moment, the US is paying over $1 billion a day just in interest payments to service its debt. A slight increase in interest rates would significantly increase these payments and leave the US with even more debt than it already has, increasing their trillion dollar per year deficits. This is a scenario whereby the US could default just as Argentina did in the early 2000′s.
If they were to stop printing money, the Fed could trigger a dollar collapse, especially if foreigners decide to no longer lend the US any more money, and start dumping US debt from their foreign reserves.
3. Rise of “Gotham City” and the Vigilantes. We know that the US is currently the largest debtor nation in the history of the world, operating on yearly trillion dollar deficits. What if the US citizens were to “wake up” and collectively stop paying their taxes? What if they were to collectively choose to no longer support political decisions that serve to perpetually increase the debt? An increase in debt ruins the prospects for future generations, after all. Taxes are essentially the life-line of any government. A cut on this life-line is like cutting the main artery to the heart. Without a tax base, government can no longer pay its bills.
A significant internal revolution by citizens would entail a collective refusal against the paying of taxes and the continual raising of the debt ceiling. Perhaps these citizens might even become bond vigilantes and sell US bonds, especially if other countries became US bond vigilantes and sell their US bonds, as well. This would likely collapse the dollar, and send the US dollar into hyper-inflation.
4. China, the largest financier of the US debt, drops the debt bomb. The Chinese can drop the debt bomb on the US just by selling a fraction of their US treasury holdings. As of June 2012, the Chinese owned $1.16 trillion in US debt (US government treasury bonds). Japan owns $1.11 trillion and the OPEC nations, $261 billion. In the last few years, China has been lowering their purchases of US debt and replacing it with other assets. To circumvent this problem, the Fed of late has been stepping in to purchase treasury bonds to make up for the lost demand of the foreigners.
China’s power is the direct result of the symbiotic trade relationship with the US. The US buys goods from China in US dollars, and China ships them the products and uses the US dollar surpluses to buy US debt, among other assets.
It may not be in the interest of China to drop the debt bomb, but it definitely has the power to do it. If this is the case, there would be so much US debt on the market that other US debt holding countries could also throw their debt on the market as well as a result of panic and fear. Triggering an international run on US debt. The US Dollar will surely collapse in this scenario.
5. China, Japan, Russia, Iran, Germany, Brazil, Australia, Chile, UAE, India, and South Africa are bypassing the dollar and creating bi-lateral trade warfare.
What if now the Chinese, instead of dropping the debt bomb, create enough bi-lateral trade agreements to avoid the US dollar altogether with foreigners? In fact China, among other countries, has already done this by trading with the Chinese Yuan instead of the US dollar. If China, Japan, Russian, Iran, Germany, Brazil, Australia, Chile, USE, India, and South Africa would continue to do so, other larger countries may follow suit and before you know it, the majority of trade would be transacted in non-US dollars. At this point, the US dollar would no longer be needed, and its world reserve currency status would collapse along with its purchasing power.
What could also trigger a large decline in the US dollar would be if a relatively large oil-producing country (like Saudi Arabia) refuses to use the US dollar to sell its oil, choosing instead something more tangible (like gold). William R. Clark’s excellent book, Petrodollar Warfare, treats this issue precisely, going in depth into the Petrodollar collapse and how the US maintains its dollar supremacy with its current imperialistic foreign policy. If a major OPEC nation refuses to sell its oil in US dollars, this could result in a total loss of confidence in the US dollar, precipitating its collapse.
6. “Good-bye Dollar, Hello SDR!” The U.N. and IMF implement a New World Reserve Currency George Soros states in a recent video interview (see here) that the US needs a “New Financial World Order,” on the pretext that the current system is “broke” and creating huge trade imbalances. The Guardian stated the following:
“The International Monetary Fund warned that the colossal United States trade deficit was a noose around the neck of the economy, emphasizing that the once mighty dollar could collapse at any moment.”
Soros, a member of the Bretton Woods Committee–the same institution that created the IMF–is now promoting the Special Drawings Right (SDR) as a potential new world currency.
The progress for the SDR has been very slow and has not received much acceptance among other nations. However, note that the US currently controls the IMF by its voting powers (17% nominal interest, and a required of 85% majority for decisions). As more and more people lose confidence in the US dollar in general due to reckless monetary and fiscal policies, the IMF can instead back the SDR with gold to promote stability and confidence. That is certainly one realistic possibility considering that they reportedly own over 2,800 tons of gold. A shift in reserve currency from the US dollar to the SDR or other another currency would undoubtedly collapse the US dollar. It’s trade imbalance is sustained by it’s reserve status.
7. A “too-big-to-fail” corporation fails: A derivative shock-wave. The Financial Stability Board (FSB) released a list of 29 “too big to fail” corporations operating around the world. According to the FSB, these banks are considered to be “systemically important financial institutions” and a failure of any one of these corporations could result in “financial systemic failure.” Of the 29 corporations on the list, 17 are based in Europe, eight in the U.S., and four in Asia.
Bank of America
Bank of China
Bank of New York Mellon
Banque Populaire CdE
Barclays
BNP Paribas
Citigroup
Commerzbank
Credit Suisse
Deutsche Bank
Goldman Sachs
Group Crédit Agricole
HSBC
ING Bank
JPMorgan Chase
Lloyds Banking Group
Mitsubishi UFJ FG
Mizuho FG
Morgan Stanley
Nordea
Royal Bank of Scotland
Santander
Société Générale
State Street
Sumitomo Mitsui FG
UBS
Unicredit Group
Wells Fargo
A failure of any one of these banks, but especially one in the US, could create a bank run, further destroying the ability to provide credit and increasing the likelihood of a dollar collapse.
What is most likely to create a bank failure is a derivative failure. Actually, a current derivatives scandal is threatening to take down the world’s oldest bank:
“Banca Monte dei Paschi di Siena, the world’s oldest bank, was making loans when Michelangelo and Leonardo da Vinci were young men and before Columbus sailed to the New World. The bank survived the Italian War, which saw Siena’s surrender to Spain in 1555, the Napoleonic campaign, the Second World War and assorted bouts of plague and poverty.
But MPS may not survive the twin threats of a gruesomely expensive takeover gone bad and a derivatives scandal that may result in legal action against the bank’s former executives. After five centuries of independence, MPS may have to be nationalized as its losses soar and its value sinks.”
The precise, total amount of global derivatives in the market is not exactly known, but estimates range from 650 trillion to 1.5 quadrillion dollars. This amount dwarfs the world’s GDP at approximately $70 trillion. (Refer to this article to see what $16 trillion looks like.) It is no wonder why Warren Buffet calls derivatives the “financial weapons of mass destruction.”
According to the Controller of Currency and National Banks, here are the stats for the following banks as of September 2012:
JPMorgan Chase
Total Assets: $1.85 trillion dollars
Total Exposure To Derivatives: $71.07 trillion dollars
Citibank
Total Assets: $1.365 trillion dollars
Total Exposure To Derivatives: $55.51 trillion dollars
Bank Of America
Total Assets: $1.448 trillion dollars
Total Exposure To Derivatives: $43.79 trillion dollars
Goldman Sachs
Total Assets: $120.43 billion (not trillion)
Total Exposure To Derivatives: $41,23 trillion
Note that JP Morgan alone has more derivative exposure than the world’s GDP. A derivative collapse is definitely an event that could take down the whole financial system and collapse the US dollar. 8. A run on the gold and silver bullion exchanges. Andrew McGuire, a former Goldman Sachs trader, disclosed that the London bullion Market Association (LBMA) trades on a net basis each year of $5.4 trillion dollars, a little less than half the size of the US economy. The LBMA is the biggest gold commodity market in the world.
But how can the LBMA do this be when the gold market is such a tiny market? The world production of gold is about 2,500 metric tons of gold (88,184,905 oz) which at today’s price of $1,667 is approximately $147 billion in yearly production value.
The LBMA is the equivalent of a fractional reserve system in that it is leveraged 100 to 1. For every ounce of real gold that is sold, 100 ounces of paper gold is sold, meaning there are 100 claims on each and every ounce of gold. These numbers were verified by Jeffrey Christian, a gold expert and founder of CMP Group (a commodities research, consulting, investment banking, and asset management company). The leverage is absurd.
The LBMA can be compared with other exchanges. The world’s gold market is backed up by approximately 2.3% of real gold. If a mere 2.5% of people would start demanding their gold, the physical gold market would explode, subsequently crushing the dollar, as the value of the dollar is inversely proportional to the price of gold.
Hedge fund manager Kyle Bass pointed out that the New York Comex has only approximately 3% of the bullion on hand to cover future contracts positions. and this game will continue if people do not demand delivery of their gold. The emperor has no clothes!
9. A central bank gold rush and foreign gold repatriation from the Fed – Gold Audit Venezuela has actually just recently received their last shipment of gold bars from the US.
“This was the largest type of operation to transport this type of metal in the last fifteen years,” said Merentes. “The repatriation of our gold was an act of financial prudence and sovereignty.” (Bloomberg)
The Germans and the Dutch have also recently requested their gold to be repatriated from the US. However, unlike Venezuela, Germany was told to wait seven years to get their gold back. That sounds odd, right?
Now the Swiss, under their recently launched Swiss Initiative to Secure the Swiss National Bank’s Gold Reserves, are hinting that they might want to get their gold back on Swiss soil. The Swiss government has a long standing tradition of backing their currency with gold.
This gold repatriation is turning out to be much bigger than a political statement. It is a total non-compliant/non-confidence vote for the US and the US dollar.
Which country is next? Mexico? They have 96% of their gold stored in the US and London.
A central bank gold rush to repatriate a country’s gold from the US can cause a huge upward demand for gold, pushing the price of gold upward and crushing the US dollar. (Especially if the Fed doesn’t have their gold and has been leased out into the market).
We have just gone through nine black swan events–events, remember, that are highly improbable but yet, when they do happen, have massive consequences.
Chris Ferrerra promises a Part 2 of this article, which he will go through five other “black swan” events that could cause the US dollar to collapse.
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