by D. Stewart Armstrong
Ladies and Gentlemen:
The realization comes to me that there is so much information of such infinitely high quality on the Internet that my commentary should be of the briefest nature. I can pass on my observations and I can possibly guide you to additional sources of excellent information. Perhaps I can even recommend newsletters that I personally believe offer the best value. But with all of these very bright people on the Web; with guys like Buckler, Russell, Willie, Murphy, Wiegand, Saunders, and so on, there is little need for me to do anything other than point you in their directions. And so the commonsense portion of seacoast-consulting.com will remain the most important part of the site. There seems to be such a clear lack of common sense in the world we find ourselves.
I encourage you to opt in to our mailing list which is jealously guarded at consulting@seacoastpub.com.
I will also continue to cover the junior mining companies as I have in the past and together we will endeavor to forge our way through this very uncomfortable period which is about to beset us.
There are several things I would like you to consider.
1. Nothing occurs in a vacuum: there is a past a present and a future. Live in the present but plan for the future and learn from the past.
2. We create our own reality; there are no victims. Be accountable and accept responsibility for your actions. This is difficult to do.
3. Do not believe everything you read or what you are told; most stories will have a bias. Sometimes you cannot even believe what you see.
4. Information that is true is the key to your success; perception is not the same as reality-Do not confuse the two.
5. Find a way to initiate real love in your life, and “the rest” will follow. Think of others: Human, animal, plant-nothing occurs in a vacuum.
6. Almost everyone is selling something so be careful “the pitch” and then what you purchase; and be very careful for what you wish.
7. Time is precious so let us be vigilant in terms of how we use it.
8. America has always been America which is to say it has always been beset by conflict. This will not change. We can minimize it.
9. Gold and silver have always been real money and fiat currencies have always failed. Always!
10. Under all circumstances work for peace but be prepared for war. But remember, wars are easy to begin and very difficult to end.
Those are the insights I would share with you today.
Historically Speaking
On August 8,2008, the dollar took a tremendous leap, er upward?–about 1.23 points on the USDX or the Dollar Index. That appeared to be the reason for the gold market to come unglued–but was it? The Wall Streeter’s were jumping up and down and proclaiming that all is now well with the world. Besides, oil was down five dollars, and the pattern repeated itself most of last week. The stock markets went up and down which is what markets do. So many pundits in the financial world were proclaiming that happy days are here again–but what really occurred?
In a word what happened was intervention. It’s rather obvious, it’s rather menacing, and all is not what it appears to be. These are more of the same patterns that we’ve been tracking for the past 10 years but on a much more intense level. Think escalation! You need to understand this as do I; as do we all! The central point to consider is that the US dollar requires resuscitation and with the aid and compliance of other nations, they will do everything in the book to save the dollar because it is intrinsically linked to every other Fiat currency on the planet. Will they succeed? Creating conflicts and wars will certainly not help.
Additionally, if you want to destroy a country, destroy its currency. We are doing that by ourselves with very little assistance from the outside. We are essentially self-destructing. Americans had better get a grip–and fast! What does this presidential election really offer?
The prices of gold and silver have been affected by the intervention but has the intervention really affected the value of gold and silver? The answer is no. We are pretty much exactly where we were two weeks ago; only worse because the politicos continue to dig deeper and deeper holes. These deeper holes, financial in nature, are going to become oh so difficult to escape. Believe me when I tell you that they fully understand this. Congress sits on their thumbs as Congress is want to do while the Executive Branch goes on a quest for power. This is not what our Founding Fathers were thinking when they created the Constitution and the Bill of Rights and the three branches of government which were to be a checks and balance system.
Escalation, intervention, resuscitation desperation, exasperation, equals extreme exhaustion. The escalation centers around the amount of intervention that has become necessary to pull the wool over the eyes of the American citizens. All “da boyz” of the world are fully cognizant of what is occurring. The intervention is orchestrated by the US Treasury and abetted by those who hold humongous quantities of US debt. And by those who would sell ever more extreme quantities of that debt in order to sustain America. How does any country borrow $1 billion a day and still pay interest on the other $10-$50000000000000 (trillion) in debt? That is a rhetorical question. How does Mr. Bush make public statements against Russia (with a straight face) for invading sovereign nations and overthrowing their governments? Does anyone remember an exercise in Iraq of a similar nature?
All of this desperation by way of the intervention is to prop up the dollar so it appears strong when in actuality it is weak. Why would they do that!? Other countries are (try to) dumping dollars because there are simply too many of them in circulation; therefore they are losing value. So it goes like this: You give us real goods and we’ll give you paper that is based on an iou (nothing?), a weak economy, and a strong (er) military. The dollar must be made to look attractive, strong, and “coming back, i.e. “returning to glory”! But in actuality, more intervention does not make the Dollar stronger, it makes it weaker because we all know that contrived markets as opposed to freer ones, are weaker markets. However, it does make gold and silver stronger because sooner or later the rooster will come home to roost– it always does.
However, the gig is very close to being up. And it is a very scary scenario that we face because the ones who matter are not buying it–literally and figuratively, so to speak. The ones that really matter are the other countries who are supporting our debt and in a sense supporting the US way of life. They are not buying the dollar, nor are they buying the hype that goes along with this scenario. Remember this: A fiat currency is a promise and in this day and age it is supported by a countries’ economy or its military might When those two things are out of balance the geopolitical scene becomes very dangerous. US citizens did not sign up for this when they voted Bush in. The US citizens are now in a quandary. Ron Paul certainly understood the economy side of the equation but the military side?
Simultaneously, at this juncture, the dollar is almost at a point of being the lesser of all evils. Europe and especially Spain, are in bad economic conditions. Therefore, right now the dollar is appearing stronger because the Euro is looking worse. The precious metals complex is looking very bright. There are many interchanging fluid financial cross currents of which must contend and understand. The the enduring value of gold and silver is NOT one of them.
I think that all the superlatives have been used by those “in the know” to describe the situation. Believe me intelligent people recognize what is occurring. The governments of the world don’t want the mom-and-pops of the world to understand what is occurring because when they do, they will realize that their hard earned money is on a fast track to zero. It’s the same old story on steroids.
But you can only fool most of the people part of the time and then all hell breaks loose. Middle-class America is exhausted while the lower echelons of America are desperate and both classes are downright angry but for different reasons.
There is a piece on U-tube that I encourage you to watch. It’s as though Thomas Paine were speaking to you directly-you remember him don’t you? Did you fall asleep in high school history? I think I did but I woke up about 20 years later and realized what an incredible country this could be if our elected leaders would simply follow the Constitution and the Bill of Rights. It speaks for itself—please paste this into your browser:
http://www.youtube.com/watch?v=pKFKGrmsBDk
The Summer Olypics seems to be a Smokescreen for the Geopolitical Stage!
It has occurred to me that these Summer Olympics in China appear to have set the stage or backdrop for so many mysterious political and financial activities. Consider the invasion of Georgia by Russia, the trashing of gold, the rise in the dollar, the Iran crisis off the front burner, the Iraq mess being downplayed and of course the political campaigns which go on ad infinitum?
In essence, this is the same old story about breaking the thermometer– gold! Consequently, there are no units of measure to which the public can easily refer. This is the way the powers that be operate. The key word is obfuscation which means to hide or conceal. Obfuscation is so incredibly important because of the public really knew what was going on in their government, they would go nuts. But it has been like this ever since 1913 when the Federal Reserve was created and like I’ve said many times before it is neither federal nor a reserve. It has nothing whatsoever to do with the United States government.
Gold and silver have been hammered for 10 years in one way or another and even since this gold bull market begin there have been more down days and days. This is the way these markets work. If there is one thing that I have been asked repeatedly, it is how long can ‘they’ continue to do this? How long or how much gold is needed in order for them to continue the ruse? Nobody knows the answer but Franklin Saunders of the Money Changer appears to have it just about right. I’ve known about Mr. Saunders for quite some time and he will be next on my honorary list in the 2009 Gift to the Gold Community.
However I want to end this with one quote from Franklin Saunders of the-moneychanger.(http://goldprice.org/silver-and-gold-prices/) And also of http://the-moneychanger.com/entry.phtml
To Quote:
“Twenty-eight years brokering silver & gold have not prepared me for what I met this morning (circa mid-August 2008). One of my wholesalers said he was not selling anything, only buying, until further notice. Another refused to give any prices until he adjusted his spreads. Another was spreading one ounce gold coins, normally at $7 - $8, at $25. Another said he was making no sales for immediately delivery or deferred payment, only sales for 30 days delivery paid at once. Premiums were high: Austrian 100 coronas, 4.7%; Sovereigns 5.2%; Krugerrands 6.8%, American Eagles 8.2% (none for immediate delivery), & Mex 50 pesos 4.5%. 90% silver was at $9,783 a bag, a whopping 6.7% premium (1368 cents an ounce on a 1282 market!). Silver American Eagles for 6 - 8 week delivery, 1586 or 23.7% premium.
But “premium” is only one way of looking at things, dividing the item’s price by the spot silver price. Another way to view it is that physical prices have de-coupled from paper prices. The paper prices — futures, ETFs, etc. — no longer rule the market.
Physical prices are declaring their independence from paper pricing as those holding physical gold & silver refuse to sell it at prevailing paper prices. I have been expecting this to happen toward the top of the bull market, catalyzed by some paper purveyor’s failure, but now? What can it mean? At the very least, the public is nourishing a gigantic hunger for silver & gold in their hands, and no place else.
By now all the leveraged silver & gold longs have been forced out, just as all the dollar shorts have been chastened, bruised, and beaten away. Either this is the greatest silver and gold buying opportunity of all time, or the end of a bull market.
But it is NOT the end of a bull market. Time alone argues that. A bull market runs 10 - 20 years, this one has run only 7, since 2001. Those who think silver & gold have fallen into the “bursting of the commodity bubble” completely misunderstand what drives them in the first place. Silver & gold are not commodities; they are money.
When investors pile into silver & gold, it’s not any commodity bubble forcing them there, but monetary demand. They aren’t buying metals because they think all the Indian ladies are going to be wearing two nose rings instead of one this season, or that the American bourgeoisie will suddenly begin stockpiling sterling silver forks again.
They are buying metals because — listen to this, get it straight once & forever — they distrust fiat central bank currencies (or if you prefer, national currencies). The dollar is trash, the yen is trash, the euro is trash; all are equally insolvent, equally unbacked by anything expect a politician’s or central banker’s promise, which is not nearly as good as that of any madame at any bordello anywhere.
The dollar is rising? So, why? Did it become better, acquire more gold backing, solve its chronic balance of payments deficit last night? Come on. Did the euro get worse overnight? The yen? How much worse could it get? You are seeing competitive devaluations, all very much worked out collegially in advance by central bankers. Fundamentally meaningless.
What is NOT meaningless is that the Great Alternative Currencies, silver & gold, have long been advancing against ALL national currencies. All markets swing like pendulums, too far one way, then too far the other. Silver & gold prices became overbought — a lot of people short dollars were long silver & gold. The dollar rallied, oil & commodities fell, sucking down silver & gold money. Look at the numbers. Even with gold down to $787.50 today, that’s only a 21.5% correction, while always more volatile silver is down 37.4%. Friends,these are normal, not outlandish, corrections. Sober up.”
What I want to know is what is in the water in Australia? Buckler and Saunders are both national treasures from that Country.
Until Next Time,
D. Stewart Armstrong
Consultant to the Junior Mining Community
Posted by D.Stewart Armstrong in Articles