Q: Hi! I have been buying gold and silver for three or four years now and cannot for the life of me understand the price of the metals today. I sure wish I would have waited until the miners were going to be forced to sell their metal for less than it cost them to get it out of the ground. Now for my question. Who wants to drive the prices so low, and who is going to ultimately benefit long term from driving prices so low? These prices can only result in massive shortages. The only people that would benefit, and that would be temporary is Miles Franklin and all the stackers.

Bill Holter's Answer:

First off it is a good thing you have been stacking even if prices are now down after your purchases.  There is no telling "when" shortages will arrive but at these prices they ultimately will.  The question is once shortages do arrive, can you get any metal and at what prices ...especially were a markup by the Chinese to occur.  If this is the case, you might have ended up with no metal and be forced to pay higher prices than you have to procure some.

Next, "who" would want low prices?  This one is obvious, the Fed and other central banks want low metals prices to keep confidence in their currencies and allow them to sell debt at ridiculously low interest rates.  If gold was now $3,000 per ounce then the "inflation secret" would be out of the bag and sovereign debt rates would be double or more.  A 6% interest rate on 10 yr. Treasuries would expose the Treasury as broke and unable to even pay interest, this would be an end to the Ponzi scheme.  The Ponzi scheme will ultimately end, suppressing metals prices aim to extend the life of Ponzi.

Q: Re: Yesterday's report that the U.S. Treasury printed a record number, 4,140,000 Silver Eagles for month of September; I am wondering just who has the deep pockets and is buying up all of these Silver Eagles? Since the PM market is so small, there cannot be that many individual John and Mary Does who are participating in this mass purchasing; thus it must be the big players and banks such as JP Morgan and/or China in their efforts to buy at such low prices, which they have manipulated in advance?

Secondly. Where is the Treasury getting this many blanks in which to print so many Eagles...who supplies them with this much silver to begin with, or is it coming from their own vaults? I know nothing as to how the U.S. mint operates, but dang that is a lot of Silver Eagles being printed and sold for each month so far!!

Andy Hoffman's Answer:

Regarding your first question, I'm not sure I understand.  4.1 million Silver eagles x $19/oz. is just $78 million.  The Fed prints this each day, as do countless other Central banks.  Plus, there are 1,500 individual billionaires on the planet, and millions of institutions of which $78 million is pocket change.  Plus, your question seems to assume there is one buyer when in fact there are many.  And for the record, we have NO DOUBT the majority of this year's (and last years') record U.S. Mint Silver Eagles are due to foreigners based on what we have seen as one of America's largest bullion dealers.

As for the U.S. Mint's operations, they have indeed run out of supply on many occasions - including 2008, 2011 and 2013 and even earlier this year when sales were rationed.  Thus, it wouldn't be a stretch to believe a new shortage is coming - and that might be soon!

David Schectman

Gold And Silver Will Win

October 8, 2014

There is a new "official" policy in effect to screen flights to the U.S. (especially from West Africa) for people who exhibit Ebola-like symptoms, such as a fever or the flu. Have we gone too far with this? I remember a story my father told me when I was very young. His family was immigrating to America from Russia and he was only eight or nine years old. He couldn't sleep the night before they departed, so his older brother stayed up all night watching over him. He had red eyes from lack of sleep. When they tried to enter the ship, his older brother was not allowed to accompany the rest of the family and had to remain behind, all alone. My father remembers watching him at the dock, tears in his eyes as the rest of the family embarked to America. Back then, pre-WW1, if you were sick, you didn't get into this country. Standards have slipped since then, wouldn't ya say.

I am so sick and tired of all of the "paid-for" newsletter subscriptions who try and predict the price of gold and silver and the timing of the up and down moves. Isn't it obvious by now that Technical Analysis doesn't work in these manipulated markets. No one gets it right, short-term. Even some of my favorite writers are off the mark, including the likes of Jim Sinclair, Richard Russell and yes, even Larry Edelson.

The only conclusion I can draw from this is that you cannot, with a high degree of accuracy, predict gold and silver's performance in the short-term. That is why Miles Franklin stands out as one of the few, in a large industry of dealers and newsletter writers, that has steadfastly presented gold and silver as "insurance" not as "for profit" items. We stress the big picture and the end game. Gold and silver will win and paper currencies will lose, but to try and time the move is fruitless. As Bill Holter often writes, the straw that breaks the camel's back is just one event removed and you have to be pro-active and early here.

The one thing I am sure of these days is that for gold and silver to resume their upward moves, a bottom must first be established. But trying to time it, or even decide what "number" the bottom will be, in advance, is warned. It seems likely that the bottom is close (in time and in price) but we will not know we have reached it until it is in the rear-view mirror. And please remember, all of the "shorts" on COMEX, the fuel that has pulled down the price of the physicals, must eventually be covered. All that selling must turn into frantic buying, once the bottom is in and the up-move has begun.

Many of our clients understand this. 2014 will be a very successful business year for Miles Franklin. August and September have been very strong - in spite of, or perhaps because of the falling prices. I guess we have educated our readership over the last 13 years, that owning gold and silver is a good thing to do and that the current prices are simply too cheap to avoid. Don't worry about a bottom - the value is here now and the timing of the turnaround is unknown.

When people like Russell, Sinclair and Edelson (to name but a few) miss the mark with their timing, I say just forget about it. Buy what you think you need, (physicals only, of course) put it away, and the day will come when you will be glad you did. And don't rush it. The longer it takes, the better. Any sane person is not in a hurry to cash in on their life or fire insurance policy. And neither should you be in a hurry to cash in on your financial insurance policy. But it could well be necessary and sooner than you think.

On second thought, let's give Richard Russell another chance. He was my first true mentor in this business, back in the early 80s. Yesterday, on King World News, Richard proclaimed that gold and silver have bottomed! He said...

Gold - I can't prove it yet but I believe the last decline in gold knocked out the last of the gold bugs and gave gold, technically, a clean slate. I believe we saw the ultimate bottom of the gold bear market on Friday, and (yesterday) the whole universe of gold is higher, and closing at its high. Everything I have said about gold is also true about silver. I believe this is the time to invest in gold and silver if you have not done so already.

If I am correct, gold should act like the release of a compressed spring. Gold above 1300 would make me even more certain of my opinion, and gold above 1350 would represent a major buy signal. If you can't handle physical gold, take a position in CEF, which represents physical silver and gold and is located in Canada.

Let me digress for awhile. I believe a new monetary system is in our future. China and Russia are combining to move the center of gold activity away from the US. Who has been buying gold as the faithful dropped out of the picture? All of the central banks, and particularly China. The direction of international power has coincided with the flow of gold. In its frenzy to pressure down the price of gold, the Federal Reserve has handed China a remarkable gift - the gift is cheap gold. But as of today, I believe we are seeing the process of cheap gold becoming more expensive gold. I'm betting that within six months physical gold will be scarce and hard to find. In a sentence, I'm betting that the long bear market is gold has ended.

-King World News, October 7, 2014

It would be a relief for many of our readers if Sir Richard is correct.

Check out the following interview with Jim Rickards. It covers a topic I write about frequently and it's the basis behind our view that the dollar is about to lose its Petrodollar standard. Nothing is more bullish for gold and silver - and terrifying for the unsuspecting American public. And then watch the second short video below of the new military hardware that is now on the market.

Jim Rickards: Obama's Abandoning the Saudis for Iran and Dooming the Petrodollar

http://www.caseyresearch.com/go/uabgn-2/MFL

My military sources report that those who wish to drive Israel into the sea should prepare themselves for a watery grave instead.

Have a look at this short video.

- Dan Friedman

__________________________

 

Quotes of the Day

Citi: Further Sharp Falls In Gold Would Likely Trigger Buying Ahead Of Chinese New Year

Citi Research looks for gold to find support in the $1,130-$1,160 region, should the 2013 double-bottom around $1,180 fail. The bank points out that the last time gold fell as sharply as it recently did, the jewelry sector responded vigorously with re-stocking. "This was particularly evident in the big rise in gold imports into Hong Kong ahead of the 2014 Chinese New Year," Citi says. "As the Chinese New Year is now only a few months away, with its increased seasonal luxury goods demands, we expect that if gold did fall sharply in October that there would once more be substantial buying ahead of that retail season. We therefore believe that gold is likely to find at least temporary support in the $1,130-$1,160 range should it break its important $1,180/oz support level."

- Allen Sykora, Kitco News, October 6, 2014

"We all know what to do, we just don't know how to get re-elected after we've done it." - Jean-Claude Juncker, former Prime Minister of Luxembourg and current President-Elect of the European Commission.

The fundamentals for gold remain positive, with a stronger U.S. dollar the main culprit hurting the metal in the last couple of months, says Adrian Day, president of Adrian Day Asset Management, in a quarterly portfolio review. The greenback was boosted by a growing divergence between the U.S. economies and anticipated monetary policy. "Dollar strength lays the seeds of its own destruction," Day says, noting this could hurt the U.S. trade picture. "The U.S. economy is not so strong that it can withstand a higher dollar; already several Fed officials have expressed concern and if the balance of future economic reports turns soft, one can expect more dovish comments from the Fed." Meanwhile, he says the "fundamentals for gold remain positive," with new mine supply growing at only a moderate rate and good demand expected from China, India and the Middle East. "Central banks continue to accumulate, with suspicions China is looking to build reserves," Day says. He also cites concerns about "monetary fragility, easy money around the world, and debt levels increasing even (as) economic growth slows, making debt service more problematic." Gold could be "close to a turn," Day says. "The dollar has moved too far, too fast, in defiance of fundamentals. Gold is testing a level where it has found support three times in the past year. And the commitment of traders report, showing over 20% short interest, is also a level from which we have seen strong rallies several times in the past. If we break the current level meaningfully, then it could be exceedingly ugly for the next few months. But if it holds, we could see a very strong rally."

- Allen Sykora, Kitco.com, October 7, 2014

Today's Featured Articles

Steve Henningsen (A New Monetary Sunrise Coming?)

King World News (John Embry - We Are Nearing A Violent Change In The Markets)

Zero Hedge (Europe & China Start Direct Trading In Euros & Yuan As De-Dollarization Expands) (Why Stocks Just Won't Drop: "Companies Spend Almost All Profits On Buybacks") (Barclays Warns "King Dollar" Could Crush Earnings) (Large Explosion At Iran Nuclear Site Kills Two Amid Speculation Of Another Israeli Sabotage)

Michael Lombardi (A Rational Look at Silver)       

Bill Holter

A Strong Dollar?

October 8, 2014

The dollar has broken higher and over the 80 level by 7-8% recently versus foreign currencies.  Is "King Dollar" back and what would it mean if it was?  First off, I do not believe King Dollar is anything more than a "less dirty shirt" in a pile of dirty clothes meaning the U.S. economy right now is not as bad ("reportedly") as either Europe or Japan.  Notice I included the phrase "right now," the U.S. is just as upside down and broke as either Europe or Japan and of course on a much grander scale.  Please keep the term "broke is broke" in the back of your mind as this is the case for all of the West's financial system.

So why has the dollar rallied?  You must remember there is huge leverage in the system and the bulk of the debt is in dollars and must be paid back along with interest ...in dollars.  As the global economy has weakened, this has put stress on the ability to pay back loans.  This has happened along with (maybe because) the Fed trying to stop QE.  They now only pump an extra $10 billion per month into the credit markets whereas they were pumping $85 billion per month last year, the credit markets were "used to" and comfortable with all this extra cash floating into them.  This (for now) is ending.   

Japan and Europe began to pick up the slack from the taper and began increasing their loose monetary policy, the Fed "passed the baton" so to speak to Japan and Europe and thus weakening their currencies.  With the yen and the euro weakening, their currencies now buy less goods than they did before.  This can also be looked at as the inflation rate going higher in both Europe and Japan, the money supplies are increasing, their currencies are dropping in value and "stuff," all stuff costs more.  The problem is that both central banks (as is also the Fed) are pushing on a string and cannot get already over levered borrowers to borrow more or spend much of the credit the central banks are creating.

There are also other problems the strong dollar brings with it.  It makes our production of goods (what's left of it) more costly and thus less competitive, it makes dollar denominated debt more difficult to carry and it also lowers any profits made by U.S. companies as the foreign currencies earned are worth less.  A stronger dollar that moves as fast as it had recently also has the potential to set derivatives off balance and as derivatives are now larger than the system itself ...a danger to the system itself.  Remember this, ANY big moves in a short period of time have the ability to bankrupt holders of derivatives and the "chain" is only as strong as the weakest link.  Should a large Japanese, European, U.S. or other bank become insolvent because of losses in the FOREX market, they ALL will become insolvent in a very fast "financial virus" or chain reaction type of event.

Another thing (mentioned above), a strong dollar makes "stuff" more expensive, food is a big part of this.  When the necessity of life, food, becomes more expensive then the common man is affected.  If food becomes "too" expensive for the common man to afford, this is when you see unrest and violence erupt.  This is simple and why so many other countries are now trying to move away from dollars and have anger toward the U.S., food priced in dollars becomes more expensive when dollars become more expensive.   

I also want to mention one other aspect to historical dollar movements.  Part of the U.S. playbook for many years has been to weaken opponent's currencies prior to wars.  This playbook works both to U.S. advantage and opponent disadvantage.  "Stuff" as in oil, supplies and equipment gets cheaper in dollars while more expensive in foreign currencies.  In the current saga with Russia, a cheaper oil price in dollars and a MUCH lower ruble value means Russia gets pinched or starved for cash flow.  Their rubles now buy less internationally and their oil revenues are also lower, exactly the recipe to weaken an opponent prior to any military action.  I believe this is an important clue as to whether we will push for "conflict" or not, I believe we will.

To answer the question whether or not King Dollar is back to stay, I don't believe there is ANY chance at all and the current strength will be very transitory.  The U.S. is broke on too many levels to count from financially to morally, ethically and everything in between.  The dollar is a fiat currency as is every other on the planet.  It is based on confidence alone and foreigners know this.  This is why the BRICS have set up a bank and a proposed clearing system.  It is also why several metals exchanges have been set up, the foreign community will attempt to bring fair dealing amongst trading partners back to where it was "pre 1971."   

As I wrote Monday, the U.S. economy and financial system have become a mirage and as such we will see another round of new, bigger and badder QE once the realities begin to set in.  Creating new dollars via credit is the only tool left in the Fed's bag of tricks.  Can they actually withdraw any of the credit they have already supplied?  Can they ever raise interest rates again?  Ever?  Can they ever shrink their balance sheet and actually sell off some of their assets?  The answer of course to all of these questions is "no."  Should you be worried about a "stronger currency" issued by a bankrupt entity over anything other than the very short term?  The answer again is a very big "YES."  

2008 Is Back With One Temporary Exception

October 7, 2014

Without exception, all nations are in dramatically worse condition than 2008. No matter what metric one uses - from debt, to GDP growth, financial stability, political tension and social unrest - 2008 can objectively be viewed as the "good old days." Sure, things were worse for a few "deer in headlights" months at the crisis peak - but otherwise, there really is no comparison. For example, Greece would do anything to be back to those halcyon days - when its debt and unemployment were dramatically lower, its GDP dramatically higher, and Neo-Nazi political parties unheard of. However, simply because Mario Draghi said he'd do "whatever it takes," Greek interest rates plunged - comically, yielding unending propaganda that Greece was "fixed." But guess what, it's decidedly NOT! In other words, the "Greek tragedy" was simply in its intermission. And when S&P's new prediction of a 2015 default unfolds, there will be no way to save it. Recall how typical Greek tragedies end, as this is exactly what we are about to see in the "second act."

Ominously, said "second act" has already started with Europe - for all intents and purposes - in the throes of a rapidly expanding depression. This week's horrifying disclosure that Europe's "leading" economy, Germany, saw its August manufacturing orders and industrial production plunge by 4.0% and 5.7%, respectively, validates this summer's historic collapse in German business confidence with nearly all European PMI indices now in the red. And while the ECB comically claims Europe is suffering "deflation," this table depicts that for the average European, inflation is the number one concern. As it is in the "Land of the Setting Sun," whose anticipated third quarter economic contraction will seal the deal on Abenomics' failure. Yes, while the BOJ cried "deflation" in 2012-13, Tokyo and Osaka were the world's two most expensive cities; and that is before Abenomics decimated the Yen's value by 45%.

Back to Europe, the "every man for himself" mentality is exploding - as Scotland nearly seceded from the UK; Catalonia will likely vote to secede from Spain on November 9^th - potentially collapsing Spain as we know it; and for the coup de grace, Switzerland may "shock the world" November 30^th, when it decides if it should re-back the Franc with gold. Trust us, this will happen if gold prices are surging by then, in response to the expanding economic implosion that will end with worldwide currency collapse. This is why TPTB are so desperately attacking paper PM prices every second of every day as elucidated by the great James Turk.

It's a war on gold out there. The central planners are pulling out all the stops to try keeping gold under their thumb. They will do whatever they can to win, including using psychological warfare on investors. But while the central planners can win some battles, I promise you they will lose this war.

-King World News, October 7, 2014

Yes, Zero Hedge writes of the "sea of red" in global equity markets; with the only reason U.S. "volatility" is so two-sided is because the PPT is fighting the inexorable plunge in stocks - large and small - with "Dow Jones Propaganda Index" support so blatant, it can only be matched by the simultaneous unprecedented capping of precious metals by its "sister manipulation team," the gold Cartel. Global currencies are imploding and physical PM demand exploding; and now that gold and silver prices are so far below the cost of production, we have ZERO doubt production levels will plummet into the abyss in the coming years.

Moreover, worldwide interest rates are in FREEFALL, validating what we so vehemently wrote of five months ago - in perhaps our most important article in years, the "most damning proof yet of QE failure." To staunch the bleeding, the Fed "painted the tape" ahead of its September meeting by goosing rates higher. But guess what, the rally in the benchmark 10-year Treasury yield stopped cold at the 2.60% yield we shouted to the rooftops about in May; and plunged thereafter, even despite Friday's "strong" NFP report. To that end, it shouldn't be long before the 10-year Treasury yield - down to 2.37% this morning - takes out its 52-week low of 2.31%, enroute to record lows as the entire world anticipates "QE to Infinity." Trust us, this WILL happen; as will the abrupt reversal of bonds' ill-begotten games - when hyperinflation inevitably arrives.

Now that "peak debt" has been passed - on the individual, corporate, municipal, sovereign, and Central bank level - global liability accumulation has turned parabolic. Consequently, the worldwide, hopelessly entangled banking system is far more insolvent than in 2008; and thus, the "free money" must exponentially expand like any other Ponzi scheme. Frankly, the only "benefit" of history's largest most suicidal money printing experiment is the "temporary exception" noted in today's title. I.e., the goosing of financial markets with limitless Central bank issued toilet paper - for the benefit of the "1%," at the expense of the "99%. And speaking of the 99%, what headline tells the story of how lethal the combination of socialism and money printing has been than the below - hot off the press? Yes, the world's largest retailer - and private U.S. employer, already notorious for preventing employees from reaching the 30-hour weekly limit qualifying them as "full-time" will be cutting off health insurance entirely for its 30,000 sub-30 hour workers.

Fortunately, "Economic Mother Nature cannot be defeated. And clearly, TPTB's "game" is on its last legs - as even the world's best companies are contracting, per Samsung's horrible earnings guidance this morning. As for the rest, not only are their businesses plunging; but the majority, their stocks as well. Gee, I wonder how the all-time high level of U.S. stock repurchases - financed with short-term debt at Fed-created all-time low interest rates - will turn out.

Zero Hedge

 Yes, as the PPT relentless gooses equities with limitless, covert futures buying - per yesterday's "hail mary," and today's "dead ringer" algorithm - the Cartel works 24/7 to prevent the inevitable PM explosion from occurring now.

Fortunately, we cannot lose by holding real physical gold and silver; as no matter how hard TPTB try to discourage - such as utilizing the aforementioned "psychological warfare"...

...they can't escape the reality of the tightest physical gold and silver supply/demand balance of our lifetime; which inevitably, will destroy the "New York Gold Pool," just as it did the "London Gold Pool" before it.

 

The China Money Report

SRSRocco Report

Until the bitter end, which may well arrive much sooner than most can imagine, the Miles Franklin Blog will be espousing the TRUTH of the dying global economy and financial system, and inevitable return to power of the "once and future kings" of money, gold and silver. Hopefully, you will respond by acting to protect yourself before the "end game" of currency collapse commences. And if you do, we hope you'll "give us a chance" to earn your business.

Commentary - www.thewealthconservancy.com

By Steve Henningsen

July 2014

Emergence

"Whatever you do, you need courage. Whatever course you decide upon, there is always someone to tell you that you are wrong. There are always difficulties arising that tempt you to believe your critics are right. To map out a course of action and follow it to an end requires some of the same courage that a soldier needs. Peace has its victories, but it takes brave men and women to win them."
-Ralph Waldo Emerson

"The road to above average performance runs through unconventional, uncomfortable investing."

- Howard Marks, Chairman Oaktree Capital Management, 2014

Throughout antiquity, people looked towards the sunrise as a sign of hope, rebirth or simply an indication that the gods were appeased and that you were granted another day. For this commentary I will use it in the light of Hope, Rebirth and Cyclicality. Hope that our past two quarter's relatively good performance signifies we are back on track, Rebirth in that I perceive our global monetary system is in the process of transformation, and Cyclicality in the geopolitical landscape. The majority of this report builds on last quarter's commentary where I briefly touched upon what I believe is a new global financial system and why I think it is already in gestation.

Rumblings from the Middle East   

"Because things are the way they are, things will not stay the way they are."

-Bertolt Brecht, German Poet

Mention the Middle East to most Americans and thoughts of oil, terrorists, and sand dunes come to mind. But ancient Mesopotamia and Persia, whose internal struggles are beyond the grasp of most Western minds, have deep sectarian roots that go back over a millennium. This area has long been comprised of three sectarian provinces; Sunnis, Shiites and the Kurds. Unfortunately, the hubris shown by Western powers in disregarding these factions when they carved up the Ottoman Empire at the beginning of the 20th century is starting to cause rifts. Lines on a map won't keep people together if they have fundamental religious differences.   

Most of the region's skirmishes of the past few decades have been between the Sunnis and Shiites, with the most recent coming from The Islamic State of Iraq and al-Sham (ISIS) looking to take back the Sunni provinces, which mostly overlap parts of Syria and Iraq. As you can see on this map from the folks at Stratfor, the three sectarian groups are spread-out throughout this region, but also overlap into Saudi Arabia, Egypt and Turkey. The epicenter is between Persian-Shiite Iran, Arab-Sunni Saudi Arabia and Turkic-Sunni Muslim Turkey. While there is a real possibility of the map lines being redrawn in this area, the situation is made more unstable via political ties to various countries. Specifically, Russia supports Iran and the current Maliki Iraq government; Saudi Arabia (a mostly Sunni nation) supports ISIS; the U.S is attempting to get Maliki to be more accommodative to the Sunnis, while trying not to upset its Petrodollar partner Saudi Arabia, and China seems to support everyone, as they just want to trade and not get involved with local politics. So far this has not affected oil prices, but things could quickly change should conflict spill over to Saudi Arabia.

Historia magistra vitae est - history is life's teacher.

So what does all of this have to do with the potential realignment of the global financial system I've been concerned about lately? One needs to focus on the weakening of the Petrodollar system, and the potential effects it would have. For those not familiar with the Petrodollar, let's go to Wikipedia:   

In 1971 Richard Nixon was forced to close the gold window taking the U.S. off the gold standard and setting into motion a massive devaluation of the U.S. dollar. In an effort to prop up the value of the dollar Nixon negotiated a deal with Saudi Arabia that in exchange for arms and protection they would denominate all future oil sales in U.S. dollars. Subsequently, the other OPEC countries agreed to similar deals thus ensuring a global demand for U.S. dollars and allowing the U.S. to export some of its inflation.

This agreement was crucial in helping the U.S. gain economic power and increase its standard of living through cheap energy and low-interest rates. All countries had to buy oil using U.S. dollars, thus flooding the world with our currency and helping it maintain its place as the reserve currency. Even better, we got Saudi Arabia, and others, to take their excess dollars and invest them in U.S. Treasuries; a.k.a. petrodollar recycling. When the U.S. needed oil, we just printed up our own currency for nothing and swapped it for oil. The petrodollar is the lynchpin to America's power, and in my opinion, the U.S. military intervened in Iraq, Libya and Syria over the years in order to protect it.   

Lately, our relationship with Saudi Arabia has soured. The U.S. has chosen not to help Saudi Arabia with some of its local problems; most recently in Syria. Adding to the power shift from West to East (Russia, China, India, Iran) is the fact that Saudi Arabia now exports more oil to its Eastern consumers than it does to the U.S. Simultaneously, the U.S. has greatly increased its own oil production capability, which profoundly alters the two countries symbiotic relationship. Should Saudi Arabia announce that it intends to sell its oil in other currencies, besides the dollar, shockwaves might be felt globally, as the dollar would likely decline and interest rates rise. American economic and political hegemony is tied to the dollar, and I expect it would erode with it.

This isn't just an "oil" thing. Over the last few years, an increasing number of countries (China, Russia, Iran, Australia, Brazil, United Arab Emirates, Turkey, etc.) have decided to ditch the dollar by putting in place bilateral trade agreements using their own currencies. The $400 billion natural-gas deal between Russia and China is a recent example. This is the first major deal done without the use of the dollar. Though the majority of global trading is still done in dollars, a trend is in place that will decrease its volume in global trade.   

"We [Europeans] are selling to ourselves in dollars, for instance when we sell planes. Is that necessary? I don't think so. I think a rebalancing is possible and necessary, not just regarding the euro but also for the big currencies of the emerging countries, which account for more and more of global trade."
-Michel Sapin, French finance minister, July 2104

It is not just the BRICS (Brazil, Russia, India, China, South Africa) nations that are calling for an end to this unipolar system, but other countries that are tired of a financial system that benefits the world's largest debtor nation while undermining creditor countries. French-government officials lashed out recently at the U.S. after one of their banks was fined billions of dollars while U.S. banks were pretty much let off-the-hook after the 2008 financial crisis. Also, news that the U.S. is spying on everyone is adding to the discontent, as much of the world - especially Germany - grows tired of America's hypocrisy and intimidation. There are increasing signs that the world's financial institutions are beginning to discuss structural changes to reduce U.S. power and allow others greater say in our global financial system. In fact, if one were simply to follow the breadcrumbs back over the decades, one would see that these thoughts are not new.   

A New Monetary Sunrise Coming?   

"People only accept change when they are faced with necessity, and only recognize necessity when a crisis is upon them." -Jean Monnet, French political economist and diplomat, July 2014

The current management of our global financial system mainly consists of a handful of government/private institutions - BIS, IMF, World Bank, and maybe the G20 - with the U.S. being in the driver's seat. (Most of these institutions were developed after WWII, when the U.S. held the most poker chips at the table - over 20 tonnes of gold - during negotiations to develop an international monetary system a.k.a. Bretton Woods.) In the late '60s the IMF created an international-reserve currency known as Special Drawing Rights (SDRs), which is simply a derivative/basket of the U.S. dollar, Japanese Yen, Euro and Pound Sterling. These SDRs weren't used much until recently, but I'm getting ahead of myself.   

Ever since these institutions were created, talks/rumors of one-world governments and currencies have persisted. In 1988, The Economist magazine ran this cover with the title, Get Ready for a World Currency. The article inside, Get Ready for the Phoenix began, " THIRTY years from now, Americans, Japanese, Europeans, and people in many other rich countries, and some relatively poor ones will probably be paying for their shopping with the same currency. Prices will be quoted not in dollars, yen or D-marks but in, let's say, the phoenix. The phoenix will be favored by companies and shoppers because it will be more convenient than today's national currencies, which by then will seem a quaint cause of much disruption to economic life in the last twentieth century."   

After several currency crises throughout the '70s and '80s, people were looking for increased stability. However, the Economist was quick to point out that "Governments are far from ready to subordinate their domestic objectives to the goal of international stability. Several more big exchange-rate upsets, a few more stock market crashes and probably a slump or two will be needed before politicians are willing to face squarely up to that choice." Eerily, the article ended with this prediction: "Pencil in the phoenix for around 2018, and welcome it when it comes."   

 Hmm...   

Thanks to the introduction of the Euro, regional currencies were being discussed throughout the 2000s such as the Union of South American Nations (UNASUR), the Gulf Cooperation Council (GCC), the Association of Southeast Asian Nations (ASEAN), and the Economic Community of Western African States (ECOWAS). In addition, prominent economists such as Robert Mundell and James Tobin were proponents of a global currency, as was former Governor of the Federal Reserve Board, Paul Volcker. Even revered Financial Times scribe Martin Wolf, wrote an article in 2004 titled, We Need a global Currency. Over the years several more articles have been written about this possibility, including papers from the IMF. (I don't want to waste space here listing articles but for those interested I obtained most of this information from Andrew Gavin Marshall's paper, The Financial New World Order: Towards a Global Currency and World Government where you can find many more articles and thoughts.)   

"The world is closing inDid you ever thinkThat we could be so close, like brothers The future's in the airI can feel it everywhere Blowing with the wind of change"-Scorpions, Wind of Change

The financial crisis of 2008 was a catalyst for further global currency considerations, as the U.K.'s Prime Minister, Gordon Brown, called for a "new Bretton Woods," followed by officials from China, India, and Russia. When the IMF used the SDRs in 2009 to increase liquidity throughout the world, The Telegraph's Ambrose Evans-Pritchard covered this move in his article titled, The G20 moves the world a step closer to a global currency.

"Explain to me how increase in paper pieces can possibly make a society richer? If that were the case, explain to me why there is still poverty in the world? Isn't every central bank in the world capable of printing as much paper as they want? And do you then think society as a whole would be richer?"-Hans Herman-Hoppe, political philosopher, sociologist and economist

Fast forward to today where there are cumulative signs of change: The BRICS opening their own "IMF type bank", increasing direct currency-swap agreements, increasing frustration with the Fed's QE program and its effect on emerging markets, the development of new credit-rating agencies, and continued transfer of gold bullion from West to East. There are also scary things being discussed by these financial institutions such as wealth taxes and bank bail-ins - a.k.a. stealing your savings account.

All this leads me to believe that the current monetary system is in flux as the current credit/debt based system is not functioning and needs change. For the first time in history, all the major economic powers of the world are overly indebted. It seems the only way out is through some type of deleveraging/depreciation event. There are many details that lack clarity. Will it involve the SDRs or will another country simply come in and back their currency with gold? Will global governances hold hands together or will fractions develop with the East going one way and the West another? Keep in mind that global-reserve-currency holders rarely give up their power without a fight. Can this be done under what is perceived to be a stable financial environment or do politician's need another financial crisis to birth this new monetary system?

Latin root of the English word "credit" - Credere = to believe, to trust "If you weaken the currency, you weaken society, you weaken trust."

-Dylan Grice, Aeris Capital, 2014 Strategic Investment Conference

With the majority of the world's developed economies battling to see who can depreciate their currency faster, I think investor's faith will also abate as Mr. Grice states. The process may be slow at first, but is likely to accelerate as people take notice of what's going. What history has shown is that when people lose trust in the financial system, they tend to transition their wealth towards hard assets. The current trend in the high-end real estate, collectables and art markets is an indication of this shift. Another one of these "hard-assets" is gold and silver which, after 12 positive years, had a rough going in 2013, but has perked up so far this year.

"It is the thing you won't see coming that will take the system down. Things happen much more quickly than what investors expect. What will happen in gold is that it will chug along and then all of a sudden-boom. It will be up $100 an ounce, and then the next day it will be up another $200 an ounce. Then everyone will be on TV saying it's a bubble-boom. It's up $300 an ounce, and before you know it, it will be up $1,000 per ounce. Then people will say gee, I better get some gold, and they'll find out they can't get it because the big guy will get it. You know, like central banks and sovereign wealth funds will be able to get the gold. The typical investor will run down to the coin shop and they will be sold out, and the U.S. Mint will say sorry, we're not shipping. You're going to find out you can't get it because the whole thing is set up for massive shortages in supply."-James Rickards, author, economist and attorney, June 2014

Portfolio Ponderings

"In skating over thin ice our safety is in our speed."

- Ralph Waldo Emerson

The obvious main risk these days is complacency. Investors have been - again - lulled into believing that the central banks have their backs, but I think those traditional risks that most investors deem banished will return over the next 18 months. Europe's banks are again wobbling and the Fed's QE liquidity is being removed from the markets just as the U.S. economy appears to be slowing again.

Going forward, my guess is that those that have been ridiculed (mostly risk-based investment managers and anyone invested in certain shiny-elements) will again appear prudent in their positioning.

It's another tequila sunrise

This old world still looks the same

Another frame

-Tequila Sunrise, The Eagles

This commentary is provided for informational purposes only and is subject to change without notice. This material should be considered for informational purposes only and should not be considered as investment advice or as a recommendation for a particular strategy or investment. Individuals should consult with their advisor regarding specific advice and the applicability of this information to their circumstances. Statements concerning market trends are based on current financial and economic conditions, which will fluctuate. Information contained herein has been obtained from sources believed to be reliable, but are not guaranteed. Any portfolio used as an example in this commentary is one that we believe to be representative of a typical client portfolio but we caution that individual performance can, and will likely, vary from the sample. All investments contain risk and may lose value, and past performance may not be indicative of future results.

John Embry - We Are Nearing A Violent Change In The Markets - kingworldnews.com

October 6, 2014

Today a man who has been involved in the financial markets for 50 years warned King World News that we are nearing a violent change in the markets.  John Embry, who is business partners with billionaire Eric Sprott, also discussed the endless stream of propaganda from the mainstream media.

Embry:  "I was astounded by the combination of Friday's U.S. jobs report and the engineered market reaction.  I really think it should be an embarrassment to any American who respects honesty and integrity.  The suggestion that 248,000 jobs created showed renewed vitality in the U.S. economy is pure propaganda.

Continue reading on King World News.com.

Europe & China Start Direct Trading In Euros & Yuan As De-Dollarization Expands- www.zerohedge.com

Submitted by Tyler Durden on 09/29/2014 23:24 -0400

De-dollarization has been an ongoing theme hidden just below the surface of the mainstream media for more than a year as Russia and China slowly but surely attempt to "isolate" the US Dollar. Until very recently, direct trade agreements with China (in other words, bypassing the US Dollar exchange in bilateral trade) had been with smaller trade partners. On the heels of Western pressure, Russia and China were forced closer together and de-dollarization accelerated from Turkey to Argentina as an increasing number of countries around the world realize the importance of this chart. However, things are about to get even more dramatic. As Bloomberg reports, China will start direct trading between the yuan and the euro tomorrow as the world's second-largest economy seeks to spur global use of its currency in a "fresh step forward in China's yuan internationalization." With civil unrest growing on every continent and wars (proxy or other) at tipping points, perhaps, just perhaps, the US really does want rid of the weight of the USD as a reserve currency after all (as championed here by Obama's former right hand economist)... now that would be an intriguing 'strategy'.

As Bloomberg reports, China will start direct trading between the yuan and the euro tomorrow as the world's second-largest economy seeks to spur global use of its currency...

The euro will become the sixth major currency to be exchangeable directly for yuan in Shanghai, joining the U.S., Australian and New Zealand dollars, the British pound and the Japanese yen. The yuan ranked seventh for global payments in August and more than one-third of the world's financial institutions have used it for transfers to China and Hong Kong, the Society for Worldwide International Financial Telecommunications said last week.

"It's a fresh step forward in China's yuan internationalization," said Liu Dongliang, an analyst with China Merchants Bank Co. in Shenzhen.

The move will lower transaction costs and so make yuan and euros more attractive to conduct bilateral trade and investment, the People's Bank of China said today in a statement on its website. HSBC Holdings Plc said separately it has received regulatory approval to be one of the first market makers when trading begins in China's domestic market.

Continue reading on Zero Hedge.com.

***

Why Stocks Just Won't Drop: "Companies Spend Almost All Profits On Buybacks" - www.zerohedge.com

Submitted by Tyler Durden on 10/06/2014 09:30 -0400

Back in May we revealed that the "Mystery, And Completely Indiscriminate, Buyer Of Stocks", obviously a key player in a time when the Fed's own indirect monetization of stocks was fading, was none other than corporations themselves, gorging on cheap debt and using the proceeds to buy back their own stock. 

And while we explained that the vast majority of companies are using up as much leverage as they can to fund said buybacks, with both total and net corporate debt levels having risen to new all time highs refuting misperceptions that corporate debt is actually declining...

...something even more disturbing was revealed today, when Bloomberg reported that companies in the Standard & Poor's 500 Index, are "poised to spend $914 billion on share buybacks and dividends this year, or about 95 percent of earnings!"

Continue reading on Zero Hedge.com.

***

Barclays Warns "King Dollar" Could Crush Earnings - www.zerohedge.com

Submitted by Tyler Durden on 10/06/2014 08:55 -0400

The US Dollar has risen for 12 straight weeks - gaining over 8% against major world currencies since June - and while talking heads proclaim the cleanest-dirty-shirt belief in "king dollar," as Reuters notes, it could pose a triple threat to US companies' earnings: driving up the costs of doing business overseas, suppressing the value of non-US sales and, perhaps most worryingly, signaling weak international demand. While the historical relationship between the dollar and the S&P 500 has been inconsistent (though some sectors are highly correlated), Barclays fears translation effects could reduce revenues and cause estimates for Q3 to be missed (even as they are marked down dramatically). Crucially, Barclays warns dollar strength is important because it is a symptom of decelerating international economic growth and they reiterate their unchanged 1975 year-end target for the S&P.

Continue reading on Zero Hedge.com.

***

Large Explosion At Iran Nuclear Site Kills Two Amid Speculation Of Another Israeli Sabotage - www.zerohedge.com

Submitted by Tyler Durden on 10/06/2014 14:31 -0400

That something took place a few hours ago when a large explosion took place near a suspected nuclear site in Iran has reportedly killed two people and according to the Washington Free Beacon, prompted speculation of sabotage at a military site long suspected of housing Tehran's clandestine nuclear activities, according to Iran's Defense Industries Organization (DIO), which operates under the country's Ministry of Defense.

The Free Beacon, citing Fars New Agency, reports that one explosion rocked a production plant late Sunday night in east Tehran, near the Parchin nuclear site.  The explosion at a facility referred to as a "production plant" caused a fire that killed two workers, according to Fars, which cited information provided by Iran's DIO. Fars first reported news of the explosion, claiming that it took place at an "explosive material factory" near Parchin. According to Iran opposition sources, the blast killed at least four military personnel.

Continue reading on Zero Hedge.com.

A Rational Look at Silver - www.profitconfidential.com

Tuesday, October 7th, 2014

 

By Michael Lombardi, MBA for Profit Confidential

As silver prices started to decline last year, silver mining companies halted projects where costs were too high in relation to the new reality of silver prices.

According to a report produced for the Silver Institute and created by Thomson Reuters GFMS, in 2013, the silver supply fell to 985.1 million ounces, down from 1,005.3 million ounces a year earlier-a two-percent drop in production. (Source: The Silver Institute web site, last accessed October 1, 2014.)

But demand for silver was increasing over the same period.

While silver prices were declining (from the same report), demand for silver in 2013 increased 13% to 1,081 million ounces, compared to 954 million ounces in 2012. Demand for silver coins and bars jumped 76% in 2013 over 2012! As silver prices fell, investors bought more silver.

The chart below compares gold bullion prices (golden line) and silver prices (grey line) over the last year.

Chart courtesy of www.StockCharts.com

Looking at this chart, you will make one key observation: while gold bullion prices still remain above their December 2013 lows, silver prices have broken below their 2013 lows and are down more than 10% year-to-date. 

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