May 2008 Issue (#46)
From now on, one whole segment of the Monitor will focus on presenting what I call “The Big Picture”. Getting that big picture is crucial, because without the larger context, even the best investment information is more or less useless.
What I really want you to see me as is more than just a guide who gets you through some rough territory, but someone who teaches you the financial equivalent of “wilderness survival skills”. This goes by the old maxim “give a man a fish and you feed him for a day; teach him how to fish and you feed him for life.”
For that reason, if you notice the following “Big Picture” part of this issue focusing on things that aren’t directly investment related, please be assured that I will tie it all together eventually, so please bear with me.
THE BIG PICTURE
HOW THE WORLD WORKS – THESE DAYS:
- To understand the world of today, stop thinking in terms of governments and countries, but think in terms of corporations – namely, the biggest and most powerful ones!
Generally, what is their most important interest? In other words, how can they make the most money and exert the most control over the markets they target?
In order to understand how “corporations” think, you must understand the thinking of those who lead them – but not only their thinking. You must understand who these people are, what drives them, and what their ideas of “achievement” are – and how they envision their version of a “perfect world.” Why? Because these are the people with the means to make it all happen.
Their number one job is to maximize returns to shareholders, and in these days of global trading platforms and online brokerages, there is no such thing anymore as a “national” corporation, at least among those who have made their IPO debuts.
The greatest obstacles to corporations’ bottom lines – other than market conditions - are nation states, their differing legal and tax structures, and international borders. Therefore, their greatest “friends” are people and organizations who support the total abrogation of national sovereignty and the legal systems, tax structures, import tariffs, and borders that come along with it.
These corporations are run by administratively very capable men with strong desires to succeed, and with the egos that usually ‘made to order’ for such driven individuals. These men and women have many strong character traits, but loyalty is unfortunately not one of them. In their world, you coax, cajole, butter up and “groom” people who you believe can help you, and the most successful ones quickly learn that in order to achieve their goals. No matter what, they have to be prepared to “kill” or betray anyone who stands in their way, be they friend or foe.
Among all corporations, banks truly are ‘a breed apart’. Legally and structurally, they are just like other corporations, except that they have the privilege of loaning money into existence.
That, and the fact that they constitute the secretive “owners” of the US Federal Reserve and other central banks around the globe makes the largest banks the most powerful corporations of the world. What their CEOs conceive in their mind becomes the “monetary policy” of the central banks, which becomes the touchstone for domestic policies of the national governments that were once bribed into chartering these central banks.
No wonder there is such a drive toward “regionalization” among all of the major governments in all of the world’s major regions. The NAU or North American Union is only one outgrowth of this global phenomenon. How do you know the official and media mouthpieces who deny that plans to create an NAU are lying?
Simply, because the same thing is happening everywhere else in the world. It would be an anomaly indeed to presume that the movers and shakers in the US, the home of the most powerful global corporations, have no interest in maximizing their profits by doing away with national boundaries.
Apart from that, all you need to do is go to the websites of the SPP, FTAA, and Council on Foreign Relations to see first hand that these plans are not just being considered, but are being implemented right under our noses.
It is this global reach of the “corporate mindset” among our elites that makes any attempt to run and hide from the coming “third way” fascist/socialist restrictions on private ownership of gold and silver – and eventually of any property – so futile. There is only one way to prevent this from happening – and that is to fight.
How to Fight
Depending on where you live in this world when you read this, you may be more or less handicapped in your efforts if you determine to fight this trend. Those who live in the United States have a huge advantage in that respect. They live in a country that was built on a legal and political structure that makes fighting this war in the US much easier than in any other place.
Granted, the US Constitution that makes this fight so much easier is overwhelmingly ignored by our elected and appointed officials – but at least it is there. At least it exists, and at least Americans can point to a more than 230 year history of it being pronounced, over and over again, that it is the law by which all other laws are to be judged, and the law by which the people control their government.
This law is what set up and defined the limits of the power of our government, and it decreed that the Congress of the people’s representatives be the most powerful political body of the country.
In spite of all the legal and judicial shenanigans and the relentless assault on the freedom this law guarantees to individual citizens, that fact ash never changed. Congress is indeed the most powerful body in our government. Even though its members themselves seem to have forgotten that fact, it truly is where the real power of this country resides – not in the presidency.
Whom (or What) to Fight:
Congress, i.e., the House of Representatives, is also the body over which the people of the United States retain the greatest influence. Presidents can stay in office for four years, Senators for six, and supreme court justices are in power for the rest of their lives once they get in, but congressmen must run for reelection every two years.
The House of Representatives is the body that makes the most laws, and they are the most accessible to individuals and groups who want to influence their lawmaking in their own favor.
That’s what we call “lobbying.”
And lobbying is what give the major corporations their most powerful tool for subverting our political process and for skewing it ever so slightly, ever so gradually, and now increasingly openly and forcefully, in their favor.
Major corporations are, well, big. They have many highly paid executives who can easily max out their individual campaign contribution limits and channel them all to one or the other candidate for his re-election campaign. These executives, having been reared with the corporate mindset, will do whatever it takes to get “their” company the best possible advantage money can buy. That is their primary loyalty. Their allegiance is to their corporate employer. Why? Because they themselves want to rise within the ranks of their corporate structure to “get to the top.”
Now, corporate executives don’t get to where they are because they are stupid. Far from it. They are some of the most intelligent and ingenious, but also some of the most devious people in the world – so, what do they do to make sure they don’t waste their money when they contribute to a candidate’s campaign?
They hedge their bets.
If you go to www.opensecrets.org you can see very clearly how the same corporations often support opposing candidates for elective office.
That is why you cannot tell any real difference between the political parties!
Any politician running for any office always courts the big corporations because that’s where the biggest campaign finance checks come from. The same thing goes for political parties. Each party courts the same corporations because they want to maximize the filling of their campaign coffers.
If you approach someone you want to ask for money, are you going there to tell that person how to run his or her business? Nope. Not likely. It’s far more likely that you will listen to the veiled suggestions of those you are courting in order to get them to give you what you want and need.
“One hand washes the other”, as they say (then how come so many politicians’ hands are so dirty?)
Now, as far as regular Americans are concerned, this obsessive-compulsive “hand washing” can be stopped only one way. The people have no direct influence over private corporations’ executives and their little schemes for increasing their power base – but they do have a very effective and quite literal way of “cleaning house” in the legislative branches of their federal (and state) governments.
Kicking “the Habit”
The only thing that stands between Americans and their resumption and exercise of the full political power the founders have bestowed on them is one very simple bad habit.
What is that habit?
That habit is a normal and quite understandable on, but in terms of the preservation of freedom, it is utterly fatal. It is the fatal habit of pushing the wrong button, or of punching out the wrong hole.
What button? The button on your local district’s voting machine that gives your vote to the incumbent candidate for office - whoever that may be.
History as well as recent experience shows that Americans, by and large, re-elect their representatives to office. The historical incumbent re-election rate is a stunning 98% or better.
That’s a very, very bad habit.
Because it encourages all kinds of abuse, laziness, and most of all disloyalty on the part of our representatives in government.
- They forget their oath of office.
- They forget that they serve us, and start believing that they are our masters.
- They begin to serve those who spend the most money on their reelection campaigns – the corporate lobbyists;
- They ignore the law that binds them, the Constitution for the United States, which makes them lawbreakers;
- They start believing that whatever their notion of “public policy” or “the public interest” is overrides the Constitution, which is the law that binds them;
- In doing so, they raise themselves above the law, presuming that they become our “rulers for a time”;
Now, the people have this super-effective way of dealing with all of these problems, and the only thing that stands between them and their success is that bad habit of continuing to push the wrong button.
Changing a habit is usually hard work and it often takes a long time before we become the masters of our habits, but in this case, kicking the habit is far easier than others.
Normal habits get a hold of us because we almost compulsively follow them every day. This one only occurs once every to years, so we have a lot of time to mentally prepare for a very simple task: The task of just pushing THE OTHER button when we vote.
It doesn’t matter whether or not the incumbent is a member of “your” party, or whether he or she sometimes votes the way you want them to vote on a certain issue. What matters is that they all vote for laws that are not authorized by the Constitution. The best and most pertinent example is the Federal Reserve Act of 1913.
Any US senator who votes to confirm a presidential appointment for Fed chief is in violation of his oath of office by that fact alone – and for that reason alone, he needs to be replaced. Period.
Every congressman or senator who considers giving the Fed the additional supervisory and policing authority that secretary of the treasury Hank Paulson has suggested on March 29 is likewise in violation of his oath of office, for the Constitution gives him no authority to do that, whatsoever.
The best proof of the truth of this argument (i.e., that party is irrelevant on choosing a representative for your district or state is in the pudding itself, and that pudding consists of the current slate of “viable” or possible candidates with which the corporate political and media establishment is trying to present you.
If you are a Republican, one look at McCain’s voting record will convince you that he is no conservative. If you are a Democrat, only yesterday, April 20th, Hillary said that, if she is president, “we will attack Iran”. Obama stated in a Fox interview that he will “support” General Petraeus who currently functions as Bush/Cheney’s bootlicker in chief for the Middle East theater.
All three candidates will do what is “right” for their corporate/banking masters – and they will ignore the Constitution and the will of the people.
All three expect you to live by and obey the laws they will have their congressional henchmen pass during their corporate-sponsored tenures of office, while all of them will completely ignore any and all restrictions the Constitution places on their exercise of political power. And the Congress made up by up to 99% of the current incumbents who are seeking to be reelected is the body that will rubberstamp each and every one of the eventual winner’s usurpations of power.
At the presidential level, there is only one remaining candidate who stands out like a sore thumb in that crowd, and that is Ron Paul. Yet, even if, by some miraculous outpouring of real patriotism of the delegates to the Republican National Convention, Ron Paul should actually become the party’s nominee, there is only so much he can achieve as president with a Congress as infested with lawbreakers as the one we have now.
Therefore, the only real means of effecting actual, beneficial, and lasting change that is left to the people is for you to go to the polls in November and PUSH THE OTHER BUTTON!
Whether or not you do this is absolutely and undeniably within your control – for once. You still have that right. You still have that power. It has not yet been taken from you – but it will.
When you lose it, it will be gone forever. You will never be able to take it back. It’s just like a nuclear standoff. Once your enemy launches his nukes and they are on their way, you must fire yours off or they will be destroyed and you will never have another chance.
The corporate banking/media/political establishment stands squarely behind every single underhanded way that has deprived you of almost every liberty that is yours by birthright. In the years since 9-11, they have launched virtually every legislative and executive nuclear missile your way that they were able to come up with. Just think of
- The Patriot Act (and its reauthorization) that allowed the government to conduct “sneak and peak” searches of your home without a warrant and without even telling you they were there. It has also conscripted the banks to become government spies of every financial move you make, forcing their employees to report all “suspicious activity” to the IRS and to FINCEN;
- The Real ID Act will require you to carry a national ID card containing biometric and other information about you without which you will not be allowed to board an airplane or to cross state lines, making you subject to random road blocks and car searches on your way;
- The Military Commissions Act – suspending the right of habeas corpus for any person, whether resident, nonresident, or US citizen, determined to be an “enemy combatant” by the executive branch;
- John Warner Defense Act – suspended the 1807 “Posse Comitatus” Act forbidding the use of US military in law enforcement activities;
- Protect America Act
- Violent Crimes Act
- FISA Bill
- Detainee Treatment Act
All of these were passed with large, bipartisan majorities. Anyone who buys the argument that the “other party’s” candidate is “even worse” than the jerk your own party dishes up for you is immediately destroyed by that one, very simple fact.
How the Game Is Played
The success of this game plan has always depended on getting people all hyped up and emotional on some issue other than our essential freedom that is guaranteed to us by our birthright and enshrined in the Constitution.
Enter “right wing” talk radio.
Talk radio has destroyed the conservative movement by subjecting its listeners to endless tirades about “how bad” the politicians and candidates from the “other party” are, and how terrible it would be to “let them win.”
Abortion, gay marriage, welfare reform, education reform (so-called “accountability” of schools and teachers), even the border and amnesty issues were trotted up to scare conservatives back into the fold and to make sure they keep voting for whatever “lesser evil” either party dishes up for election or reelection.
The undeniable victim in this non-debate was our freedom. Under the guise of pursuing a “conservative” agenda, Republicans were deceived into reelecting an administration that has done more harm to our constitutional form of government than any other in this country’s history.
The Circle Closes
The other undeniable victim was your financial privacy – and that’s how the circle closes in this “Big Picture” portion of May’s Monitor Issue.
You cannot move or spend any aspect of your wealth without the US government either knowing or finding out about it, and if you try, you have to be so careful in concealing your actions and in covering your tracks that your actions can easily be used as proof that you are “trying to hide something” and therefore have acted with a guilty conscience, which provides the necessary element of proof that lawyers call “mens rea” or “guilty mind” – a prerequisite (how much longer?) for any criminal prosecution.
All of this is in the best interest of the largest corporations.
When people have privacy and the right to do with their property as they please as long as they do not infringe on the rights of others thereby, and when they have the right and the means to protect their own property without relying on the state for such, then governments are weak.
When governments are weak, they do not have the power to enact and execute laws that are designed to gradually but consistently take people’s rights and property away from them.
Further, the Constitution expressly states that it is a “Constitution for the united States of America”. When the national government for which the Constitution was written is subsumed under a regional arrangement, the Constitution loses any claim to legal force and effect- and will become null and void. It will no longer restrain any official from doing anything at all – and that includes the official abrogation of national borders and legal/tax structures.
And that is definitely goal number one for the largest corporations of the world.
Why the Humongous Loop?
Why did we make such a huge detour through the thicket of human greed and corporate arrogance? Because the banks, especially central banks, are at the epicenter of this corporate maelstrom that is in the process of grinding down every last vestige of individual, private property rights and human freedom.
You see, corporations are in their very nature collectivist entities. The rights and abilities of individual members are only furthered if they serve to advance the collective goal or the whole. They are, in effect, “mini-communisms”, or rather “mini-fascisms”. Their very existence is geared toward giving the elites who direct them special rights, powers, and abilities and making all the other schlobs work primarily in order to enable the leaders to wield and expand their unusual powers.
And the power to defeat them lies in your and everybody else’s power to vote your own local incumbent congressman out of office – whoever he may be.
Why All of This Is Important
My reason for spending this much time on explaining the background in front of which we all live, work, safe, and invest today is threefold:
- It is important not to fool ourselves into thinking that there is this magical newsletter you can subscribe to that tells you all the secrets about keeping your money safe from your greedy and power hungry politicians. The big secret here is that there is no such secret.
- Once you understand that, it is important to realize how desperately close we are to absolute tyrannical control of every phase of our lives by no one other than the US Fed. The US government as currently constituted (not the “ship” [structure] itself, but its “crew” [the current office holders] are merely the political arm of the Fed; and finally
- Once you realize all of the above, it is absolutely crucial to understand that there is hope. Not just some faint, distant hope, but a very real, concrete, immediately achievable way of fumigating the halls of Congress in such a way that it is they who cannot run or hide from the power of their masters.
I very strongly feel that newsletter writers who sell you on the idea that using this or that “legal loophole” to “shelter” your assets from these threats are doing you a huge disservice.
Maximizing your profits (especially dollar-profits) is no longer the name of the game. Profits are counted on computer screens, and they can be wiped out at the flick of a switch. Gold and silver in your possession will remain in your possession until you yourself surrender them.
In a real crisis (like the one that is looming over us), their real value will be apparent, and it will have nothing to do with what traders at the COMEX are doing.
Now, let’s turn to what has been happening since last month:
INFLATION, INFLATION – TO KILL A NATION
In a globalized economy, what used to be one country’s inflation problem is now the world’s problem.
During the 90s, the US drove economic growth by importing the world’s goods and exporting dollars. To keep the money spigot open, exporters prevented their own currencies from rising against the dollar by “pegging”. Pegging means nothing other than tracking US interest rate policy. To stay low relative to the dollar, countries legislatively (or by central bank decree) initially valued their currencies at a certain point below that of the dollar and then made their interest rates track the movements of the US Fed. This fueled these countries relative booms – but also inflation because, in a fiat world, credit is money. Low rates mean much credit is being given (i.e., consumer and business indebtedness rises) which is counted as “money” by authorities.
Result: The current food riots. Too much money creation caused economic expansion, which put upward pressure on commodities through rising demand, and that was easily paid for with the excessive credit-created tradable debt we call “money”. Now the inflation-bill is coming due at the precise time when the US is contracting while the dollar is falling. To combat inflation, Asian exporters are letting their currencies now rise which makes things even more expensive for Americans while growing Asian demand (from the increased fiat-prosperity) drives up food prices, which puts upward pressure on labor prices, which in turn make products more expensive.
The increased prosperity now gives them a chance to export to each other, leaving the US in the dust.
What is the US Fed’s response? Another lie – what else?
The Fed is putting the rumor out that they “may” be pausing in their rate cuts. Two concrete signals were given this past Wednesday: this weeks cut was only 25 basis points, and there was a lame hint that next time around, they may leave interest rates alone.
But, does that mean the Fed will stop inflating?
The answer to that one is a bellowing, resounding ”No way!” Two days later, on May 2nd, the Fed announced that it will up its “TAF” or Term Auction Facility ante to $150 billion per month!
In December, when that “facility” was first announced, it was for $40 billion of loaned cash per month, to be lent for 28-day terms to the highest bidders, i.e., the banks most strapped for cash that they were unable to borrow from other banks. In other words, the idea was to inject liquidity into the frozen inter-bank lending market.
In February, that went up to $60 billion per month, only to be raised to $100 billion per month in March, and now, in May, we’re up to $150 billion dollars per month of new liquidity (i.e., electronically printed “cash”) entering the US financial system.
Ah, you say, but it’s all just a loan for a very short term, so surely it can’t jack up our money supply for very long because, after the loans are paid back, the amounts are no longer counted as part of the money supply.
That’s correct, in theory, but incorrect in practice because the intention was never for the recipient banks to pay that money back so quickly. Otherwise, the benefit would be virtually nil. It only works if the “loans” are rolled over indefinitely.
Well, the Fed did us one better, yet.
In theory, again, these loans were not actually rolled over, but they might have been as well. Instead of rolling them over, the Fed just keep announcing so-called “additional” TAFs for each succeeding month.
These are the auction results, so far:
Term Auction Facility:
January: $60 billion
March: $100 billion
April $100 billionTotal TAF so far: $320 billion
Term Securities Lending Facility:
March/April: $100 billion (so far)
Now that the Fed has decided to lend another $150 billion under the TAF during May, we will have $470 billion dollars added to the money supply – in addition to the “printing” that goes on as a result of the interest rate reductions since last September.
The Fed doesn’t publish its Open Market Operations, i.e., how many treasuries it buys from the domestic public in order to inject money into the economy. We only know that buying takes place and what they buy it with is fairy tale money, meaning electronically “printed” cash.
Many people don’t realize this, even in gold bug circles. That’s why the federal funds rate is called a “target rate”. It is the rate they are aiming to get to by buying short term treasury bills in the “open market” so that their prices rise, which decreases their yields, and that is what ends up being the interest rate on short term bills. Treasury prices and yields move in opposite directions.
So this “TAF” lending has the same effect, but it is done by different means. Instead of buying treasuries and printing the money to pay for them (i.e., “crediting” the seller’s account in the amount of the purchase price), the Fed simply prints the money it pretends to “auction” off to the banks. The auction “price” of course is the interest rate the banks are willing to pay for that stuff, and the money is only loan.
The end result is that we will get inflation whether we know it or not. The rate-cutting gambit is being stopped to allow the forex traders the illusion that the dollar might be worth something again, some day in the distant future, so they have a reason to go out and buy dollars to shore up its precipitous decline – but it’s all smoke and mirrors.
What the Fed giveth with one hand (a “pause” in its rate cutting schedule), it taketh away with the other. New game? No. Effective? Yes. Traders hang on Greenspan or Bernanke’s every word so they can trade off the anticipated price moves they think their respective words will engender.
That’s why I always advise people not to trade. It only feeds into the system – and the system always goes against you if you value your freedom and your property.
IS THE GOLD DROP OVER?
I wish I could tell you yes – but I can’t. Today looked nice and encouraging. Gold pretty much stabilized above the $850 level with only the briefest dip down to $845 right after the COMEX open, and it closed the day right around $855 while silver was up some 20 cents or so.
The fact that is did stop here is very encouraging, though, because if it had ploughed right through that support level dating back to 1980, that would have been a really bad sign. Yet, just because the current level has held for the week, this doesn’t mean that next week we will see mostly sideways or upward movement.
As I said, the Dow is going up again, so one big reason for suppressing gold is no longer an immediate concern. Gold is frequently allowed to rise alongside the Dow, as has been the case for most of the time since 2003.
Other reasons are that the employment figures and ISM came in ”better than expected.” Of course, that is always a good line for them to drop. They don’t even have to falsify the numbers. All they have to do is lie about what the expectations were in the first place, since they never disclose nor are required to disclose who the “experts” are who formulate these expectations. Next, they gun the equities markets by futures buying before the market opens, while selling some treasuries to make it appear like treasury prices are dropping “in response” to the buying in equities, i.e., because money is “flowing out of” treasuries and into equities, and voila – you have a “recovery” in process.
This brings us to the completely counter-intuitive but very much reality-reflecting observation that, at first, gold will rise strongly in a crisis due to normal market reasons (people selling paper assets and buying real assets). This will continue for as long as the financial powers are in crisis mode and are working furiously to twist all of the numbers and news reports around until some illusion on normalcy is restored. However, when a really bad life or death crisis that the Bear Stearns debacle comes up, they are forced to combine all efforts to push gold down so the market’s natural barometer won’t betray them.
That is what happened. We are now in the early illusory recover phase. Their need to suppress gold is considerably lower than it was two weeks ago, but they would still benefit from continuing to hit gold for as long as they got the big funds on the run.
Naturally, all of this benefits you more than it hurts you. It’s a gift from heaven passed on to you through an unlikely conduit: The anti-gold powers. Let’s take a look at the chart with the three or four consecutive ascending trend lines for gold and see where we are.
Gold has broken through it’s “Slope 3” support and is on its way to the next level of support, which is the 200-day moving average, marked by the top green arrow on the right. It is between $800 and $850, so it can easily happen that gold will overshoot a bit and touch $800 before resuming its uptrend. The second support level comes in right at $750, which is where the thin red extension of “Slope 2” hits the right margin of the chart. The last support level is $550, the point where “Slope 1” hits the margin.
I consider it very possible that gold will hit $800. I doubt it will go below that, but I could be wrong, of course. What I do not doubt is that this gold bull is still in its early stages, no matter what the phantom numbers on these fairyland charts show us, for that’s what they ultimately are: an expression of what the authorities want us to see, because they are based on the phony figures that the paper-trading process at the COMEX is showing us..
Silver’s chart looks quite different.
Silver is now right on top of its “Slope 3” support line and above its horizontal support line near $15. It would have to go below $14 to break the Slope 2 uptrend. It is therefore very possible that silver will bounce from here and will actually lead the next step of gold’s uptrend, while gold may be lagging behind a bit. Next week’s action will reveal which one of these options it chooses. I have nothing at this time on which to base a prediction, not even a hunch. We will just have to wait and see.
Discussion of the remaining usual charts, (i.e., the Dow, oil, rates/bonds, and the dollar will be uploaded tomorrow.
See you then.