The Beginning Of The End
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The Dow And S&P 500 Soar To Irrational Heights – Meanwhile The Ultra-Wealthy Rush To Buy Gold Bars

Gold Bars - Public DomainDid you know that the number of gold bars being purchased by ultra-wealthy individuals has increased by 243 percent so far this year?  If stocks are just going to keep soaring, why are they doing this?  On Thursday, the Dow Jones industrial average and the S&P 500 both closed at record highs once again.  It is a party that never seems to end, and there are a lot of really happy people on Wall Street these days.  But those that are discerning realize that we witnessed the exact same kind of bubble behavior during the dotcom boom and during the run up to the last financial crash in 2007.  The irrational exuberance that we are witnessing right now cannot go on forever.  And the bigger that this bubble gets, the more painful that it is going to be when it finally bursts.  Those that get out at the peaks of the market are the ones that usually end up making lots of money.  Those that ride stocks all the way up and all the way down are the ones that usually end up getting totally wiped out.

To get an idea of how irrational the markets have become, all one has to do is to look at Twitter.

Would you value “a horribly mismanaged company” that is less than 10 years old and that has never made a yearly profit at 31 billion dollars?

Well, that is precisely how much the financial markets say that Twitter is worth at this moment.

Even though Twitter will probably never be much more popular than it is right now, it continues to bleed money profusely.  On a GAAP (generally accepted accounting principles) basis, Twitter lost an astounding 145 million dollars during the second quarter of 2014…

Twitter’s GAAP net loss totaled $145 million, up from $42 million a year ago. On a GAAP basis, Twitter lost $0.24 per share. Investors, however, were not expecting Twitter to be profitable by GAAP measurements, so the loss isn’t too much of a drag.

Why would anyone want to invest in such a money pit?

Here are some more disturbing financial numbers about Twitter from David Stockman

Currently, Twitter (TWTR) is valued at $31 billion.That’s 18X revenue, but the catch is that the revenue in question is it’s lifetime bookings over the 18 quarters since Q1 2010.

When it comes to profits, the numbers are not nearly so promising!  For the LTM period ending in June, TWTR booked $974 million of revenue and $1.7 billion of operating expense. That why “NM” shows up in its LTM ratio of enterprise value to EBITDA. It turns out that its EBITDA was -$704 million. In fact, its R&D expense alone was 83% of revenues.

Of course the truth is that Twitter should be able to make money.

And it probably would be making money if it was being managed better.

The following is what Silicon Valley venture capitalist Peter Thiel said about Twitter on CNBC the other day…

“It’s a horribly mismanaged company — probably a lot of pot-smoking going on there.”

But because Twitter is a “hot tech stock” investors are literally throwing money at it.

And there are many other tech companies that have similar stories.  Off the top of my head, Snapchat, LinkedIn, Yelp and Pinterest come to mind.

Fueled by the quantitative easing policies of the Federal Reserve, U.S. stocks have enjoyed an unprecedented joy ride.

However, as David Stockman recently told Yahoo Finance, the subsequent crash is likely to be enormously painful…

“I think what the Fed is doing is so unprecedented, what is happening in the markets is so unnatural,” he said. “This is dangerous, combustible stuff, and I don’t know when the explosion occurs – when the collapse suddenly is upon us – but when it happens, people will be happy that they got out of the way if they did.”

The behavior that we are observing in the stock market simply does not reflect what is happening in the economy overall whatsoever.

In many ways, U.S. economic fundamentals just continue to get even worse.  Small business ownership in the United States is at an all-time low, the labor force participation rate is the lowest that it has been in 36 years, and the U.S. national debt has grown by more than a trillion dollars over the past 12 months.

But on Wall Street right now, there is very little fear that the party is going to end any time soon.

The following is how Seth Klarman recently described the market complacency that he is seeing at the moment…

To put it a bit differently, writer and investor John Mauldin is right when he says that there is “a bubble in complacency.” Fear has effectively been banished. The members of the Fed know it. Stock traders who chase the market to new highs almost daily know it. Implied volatilities (and realized volatilities) are historically low (the VIX Index recently hit a seven-year low), and falling. The Bank for International Settlements recently cautioned that financial markets are euphoric and in the grip of an aggressive search for yield. The S&P has gone over 1,000 days without a 10% decline, according to Birinyi Associates. Dutch and French 10-year government bond yields are at 500 and 250 year lows, respectively; Spain, 225 years. Spanish debt yields were recently inside of U.S. levels.

But as Klarman also observed, just because “investors have been seduced into feeling good” does not mean that this current bubble is any different from what we witnessed back in 2007…

It’s not hard to reach the conclusion that so many investors feel good not because things are good but because investors have been seduced into feeling good—otherwise known as “the wealth effect.” We really are far along in re-creating the markets of 2007, which felt great but were deeply unstable when shocks started to pile up. Even Janet Yellen sees “pockets of increasing risk-taking” in the markets, yet she has made clear that she won’t raise rates to fight incipient bubbles. For all of our sakes, we really wish she would.

Meanwhile, the ultra-wealthy are making moves to protect themselves from the inevitable chaos that is coming.

For example, the Telegraph recently reported that sales of gold bars to wealthy customers are up 243 percent so far in 2014…

The super-rich are looking to protect their wealth through buying record numbers of “Italian job” style gold bars, according to bullion experts.

The number of 12.5kg gold bars being bought by wealthy customers has increased 243 percent so far this year, when compared to the same period last year, said Rob Halliday-Stein founder of BullionByPost.

“These gold bars are usually stored in the vaults of central banks and are the same ones you see in the film ‘The Italian Job’,” added David Cousins, bullion executive from London based ATS Bullion.

Do they know something that we don’t?

The ultra-wealthy are able to stay ultra-wealthy for a reason.

They are usually a step or two ahead of most of the rest of us.

And any rational person should be able to see that this financial bubble is going to end very, very badly.

9 Signs That China Is Making A Move Against The U.S. Dollar

The U.S. DollarOn the global financial stage, China is playing chess while the U.S. is playing checkers, and the Chinese are now accelerating their long-term plan to dethrone the U.S. dollar.  You see, the truth is that China does not plan to allow the U.S. financial system to dominate the world indefinitely.  Right now, China is the number one exporter on the globe and China will have the largest economy on the planet at some point in the coming years.  The Chinese would like to see global currency usage reflect this shift in global economic power.  At the moment, most global trade is conducted in U.S. dollars and more than 60 percent of all global foreign exchange reserves are held in U.S. dollars.  This gives the United States an enormous built-in advantage, but thanks to decades of incredibly bad decisions this advantage is starting to erode.  And due to the recent political instability in Washington D.C., the Chinese sense vulnerability.  China has begun to publicly mock the level of U.S. debt, Chinese officials have publicly threatened to stop buying any more U.S. debt, the Chinese have started to aggressively make currency swap agreements with other major global powers, and China has been accumulating unprecedented amounts of gold.  All of these moves are setting up the moment in the future when China will completely pull the rug out from under the U.S. dollar.

Today, the U.S. financial system is the core of the global financial system.  Because nearly everybody uses the U.S. dollar to buy oil and to trade with one another, this creates a tremendous demand for U.S. dollars around the planet.  So other nations are generally very happy to take our dollars in exchange for oil, cheap plastic gadgets and other things that U.S. consumers “need”.

Major exporting nations accumulate huge piles of our dollars, but instead of just letting all of that money sit there, they often invest large portions of their currency reserves into U.S. Treasury bonds which can easily be liquidated if needed.

So if the U.S. financial system is the core of the global financial system, then U.S. debt is “the core of the core” as some people put it.  U.S. Treasury bonds fuel the print, borrow, spend cycle that the global economy depends upon.

That is why a U.S. debt default would be such a big deal.  A default would cause interest rates to skyrocket and the entire global economic system to go haywire.

Unfortunately for us, the U.S. debt spiral cannot go on indefinitely.  Our debt is growing far, far more rapidly than our GDP is, and therefore our debt is completely and totally unsustainable.

The Chinese understand what is going on, and when the dust settles they plan to be the last ones standing.  In the aftermath of a U.S. collapse, China anticipates having the largest economy on the planet, more gold than anyone else, and a respected international currency that the rest of the globe will be able to use to conduct international trade.

And China is not just going to sit back and wait for all of this to happen.  In fact, they are already doing lots of things to get the ball moving.  The following are 9 signs that China is making a move against the U.S. dollar…

#1 Chinese credit rating agency Dagong has downgraded U.S. debt from A to A- and has indicated that further downgrades are possible.

#2 China has just entered into a very large currency swap agreement with the eurozone that is considered a huge step toward establishing the yuan as a major world currency.  This agreement will result in a lot less U.S. dollars being used in trade between China and Europe…

The swap deal will allow more trade and investment between the regions to be conducted in euros and yuan, without having to convert into another currency such as the U.S. dollar first, said Kathleen Brooks, a research director at FOREX.com.

“It’s a way of promoting European and Chinese trade, but not doing it with the U.S. dollar,” said Brooks. “It’s a bit like cutting out the middleman, all of a sudden there’s potentially no U.S. dollar risk.”

#3 Back in June, China signed a major currency swap agreement with the United Kingdom.  This was another very important step toward internationalizing the yuan.

#4 China currently owns about 1.3 trillion dollars of U.S. debt, and this enormous exposure to U.S. debt is starting to become a major political issue within China.

#5 Mei Xinyu, Commerce Minister adviser to the Chinese government, warned this week that if the U.S. government ever does default that China may decide to completely stop buying U.S. Treasury bonds.

#6 According to Yahoo News, China has already been looking for ways to diversify away from the U.S. dollar…

There have been media reports this week that China’s State Administration of Foreign Exchange, the body that handles the country’s $3.66 trillion of foreign exchange reserve, is looking to diversify into real estate investments in Europe.

#7 Xinhua, the official news agency of China, called for a “de-Americanized world” this week, and also made the following statement about the political turmoil in Washington: “The cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations’ tremendous dollar assets in jeopardy and the international community highly agonized.”

#8 Xinhua also said the following about the U.S. debt deal on Thursday: “[P]oliticians in Washington have done nothing substantial but postponing once again the final bankruptcy of global confidence in the U.S. financial system”.  The commentary in the government-run publication also declared that the debt deal “was no more than prolonging the fuse of the U.S. debt bomb one inch longer.”

#9 China is the largest producer of gold in the world, and it has also been importing an absolutely massive amount of gold from other nations.  But instead of slowing down, the Chinese appear to be accelerating their gold buying.  In fact, money manager Stephen Leeb says that his sources are telling him that China plans to buy another 5,000 tons of gold.  There are many that are convinced that China eventually plans to back the yuan with gold and try to make it the number one alternative to the U.S. dollar.

So exactly what would happen if the Chinese announced someday that they were going to back their currency with gold and would no longer be using the U.S. dollar in international trade?

It would change the face of the global economy almost overnight.  In a previous article, I described some of the things that we could expect to see happen…

If China does decide to back the yuan with gold and no longer use the U.S. dollar in international trade, it will have devastating effects on the U.S. economy.  Demand for the U.S. dollar and U.S. debt would drop like a rock, and prices on the things that we buy every day would soar.  At that point you could forget about cheap gasoline or cheap Chinese imports.  Our entire way of life depends on the U.S. dollar being the primary reserve currency of the world and being able to import things very inexpensively.  If the rest of the world (led by China) starts to reject the U.S. dollar, it would result in a massive tsunami of currency coming back to our shores and a very painful adjustment in our standard of living.  Today, most U.S. currency is actually used outside of the United States.  If someday that changes and we are no longer able to export our inflation that is going to mean big trouble for us.

The fact that we get to print up giant mountains of money and virtually everyone around the world uses it has been a huge boon for the U.S. economy.

When that changes, the word “catastrophic” is not going to be nearly strong enough to describe what is going to happen.

According to a Rasmussen Reports survey that was released this week, only 13 percent of all Americans believe that the country is on the right track.  But the truth is that these are the good times.  The American people haven’t seen anything yet.

Someday people will look back and desperately wish that they could go back to the “good old days” of 2012 and 2013.  This is about as good as things are going to get, and it is only downhill from here.

Silver At Less Than 19 Dollars An Ounce? Are You Kidding Me???

SilverThe day that silver traders have been waiting for has arrived.  On Wednesday, the price of silver dropped another 5 percent.  As I write this, it is sitting at $18.55 an ounce.  On Wednesday it hit a low that had not been seen in three years.  Overall, the price of silver has declined by 34 percent this quarter.  That is the largest quarterly move in the price of silver in more than 30 years.  So what does all of this mean?  It means that we are looking at a historic buying opportunity for those that are interested in silver.  Yes, gold is undervalued right now as well, but it is absolutely ridiculous how low the price of silver is.  At the moment, the price of gold is about 66 times higher than the price of silver is.  But they come out of the ground at about a 9 to 1 ratio, and unlike gold, silver is used up in thousands of common consumer products.  Those that want to invest in silver should be shouting for joy that prices have fallen this low.  If you have been waiting and waiting and waiting to “load the boat”, your moment has arrived.

In my previous articles, I have warned over and over again that we would see wild swings in the prices of gold and silver.  For example, I wrote the following back in April

As I mentioned above, gold and silver are going to experience wild fluctuations over the next few years.  When the next stock market crash comes, gold and silver are probably going to go even lower than they are today for a short time.  But in the long run gold and silver are going to soar to unprecedented heights.

Investing in gold and silver is not for the faint of heart.  If you cannot handle the ride, you should sit on the sidelines.  We are entering a period of tremendous financial instability, and holding gold and silver is going to be like riding a roller coaster.  The ups and downs are going to shake a lot of people up, but the rewards are going to be great for those that stick with it the entire time.

Right now, a lot of people that bought silver when it was 25 dollars an ounce or 30 dollars an ounce are probably feeling discouraged.

Don’t be.  You will be just fine.  When the price of an ounce of silver hits 100 dollars an ounce you will be very thankful for the silver that you stored away at those prices.

We are moving into a time when we will see more volatility in precious metals prices than we have ever seen before.  That means there will be some tremendous opportunities to make money.  But in order to make money, you have to buy low and sell high.

The current decline in the price of paper silver does not have anything to do with the demand for actual physical silver.  In fact, demand for physical silver is higher than it ever has been before.

For example, sales of silver coins by the U.S. Mint have set a brand new all-time record high during the first half of 2013.

Last year, the U.S. Mint sold 33 million ounces of silver for the entire year.

This year, the U.S. Mint is on pace to sell 50 million ounces of silver for the entire year.

So don’t be alarmed that the price of silver is falling.

Instead, be very, very thankful.

Hopefully it will go even lower.

And you know what?  There is a decent possibility that the price of silver may go down a bit more.  This will especially be true during the initial stages of the next financial panic.

When the price of silver does dip, it is a perfect opportunity to load the boat, because even many mainstream analysts are projecting that the price of silver is headed into the stratosphere over the long-term.  For example, the following is what Citi analyst Tom Fitzpatrick told King World News the other day…

Again, if you look at silver going back to the 2008 correction, we got down to levels below $9, then we saw the silver price multiply by a factor of over 5 times. So assuming this marks a point near the end of the correction in silver, then our bias would be one that would take silver not only to new all-time highs, but we would look for a target as high as $100 for silver

A chart illustrating the projections that Fitzpatrick is making can be found right here.

There are so many reasons to own silver (even as opposed to owning gold).  The following is an excerpt from a recent article about silver that really caught my attention…

*****

7. Silver is way below its nominal record price of $50 in 1980.  It is even further below the government inflation adjusted level of $135.  And if you use REAL inflation adjusted numbers, like Shadowstats, the REAL 1980 inflation adjusted price of silver would have to be $450!  Silver is a precious and depleting resource and when you look at the price of housing, cars, education, food, energy, taxes, insurance back in the 1980′s, it is insane to think that silver is so cheap on any level.  Especially when the uses of silver have skyrocketed since the 1980’s.  It is now used in technology on a massive scale and is even now said to cure cancer.  Heck, they did not even have Silver Eagle sales back then, or the Silver Bullet Silver Shield for that matter.

8. This time it is going to be much larger!  None of the problems from the 2008 Banking Crisis have been solved.  In fact it is orders of magnitudes worse.   What started out as an institutional  problem, is now a sovereign nation problem.  This collapse will not be a puny multi – billion dollar corporation like AIG disintegrating, it will be the Trillion dollar economies of the nations of the world and the Quadrillion dollar derivative monster markets cracking apart.  There is no financial, political or social safety net left.  We destroyed all of that in 2008 and are on a debt based junkie delusion.

The collapse of currencies will affect every counter-party, debt based asset in the world. Your cash, stocks, bonds, Real Estate, pensions, insurance, all of it.  The collapse of financial contracts will lead to the collapse of all political and social contracts.  The Anger Phase of humanity is coming and only real assets with no counter party risk will be worth anything.  Most commodities have storage or degradation issues leaving only precious metals as a real store of wealth.

9. 1:65 Ratio makes silver the only choice.  The current gold to silver ratio is: 1 ounce of gold is worth 65 ounces of silver.  These come out of the ground at a 1:9 ratio!  That means just to get back to the natural mining ratio, silver would have to out perform gold 600%.  This is regardless what happens to the dollar value of gold.  If gold goes to $13,000 an ounce, silver at a 1:9 ratio would be $1,444 silver.

10. The historical stockpiles of silver are destroyed.  We know implicitly that gold has been treasured and kept secure.  While silver has been used and abused as a cheap, industrial metal like tin.  Since the price of silver has been under attack since the Crime of 1873, silver has been used in such small quantities that it has been destroyed.  The US government in 1950 had 5 billion ounces of silver in its strategic stockpile, now it has ZERO. So if gold and silver come out of the ground at a 1:9 ratio and gold has been treasured and silver stockpiles destroyed, logic would dictate that the end of this silver bull market will find the gold to silver ratio BELOW 1:9 and I think it will come close to a 1:1.  Either way, we are a long way away from those levels which makes silver so exciting right now.

It is the destruction of huge stockpiles like this that explains the decade long supply deficit to the growing demand of silver.  Do not forget that we are only 7 years away from the United States Geological Survey’s prediction that if we continue to consume silver at these rates, silver would be the first metal to become extinct.  When I challenged the USGS on that statement, they said that only a massive revaluation of silver to bring on more production and wiser use of silver would stop the extinction.  I don’t think we will ever run out of silver, but I do believe that the free market will crush this paper manipulation and that anyone holding physical silver on that day will then have a lottery ticket in real value.

*****

You can read the rest of that excellent article right here.

Do you want some more reasons to own silver?

The following are some excerpts from an excellent article by Mark Thomas

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The amount of silver consumed annually and bought for investment exceeds currently exceeds total annual mining output and has for years. That gap has been filled by sellers willing to sell from existing inventories and as prices rise. As time passes this will naturally push prices significantly higher until this fundamental imbalance reaches a true equilibrium price where supply is closer to demand.

*****

Both industrial and investment demand for silver is growing in excess of the annual increase in mining production growth. The available inventory is low and will get even tighter over time. These two factors will lead to a continued tighter supply-demand situation going forward.

*****

Silver is an industrial metal with over 10,000 commercial applications. Because it is one of the best electrical and thermal conductors, that makes it ideal for electrical uses such as switches, multi-layer ceramic capacitors, conductive adhesives, and contacts. It is used in some brazing and soldering as well. Silver is also used in solar cells, heated automobile wind shields, DVD’s and some mirrors.

*****

Silver is an essential element in the electronic gadgets that are a growing part of our digital age. It is in every cell phone, smart phone, tablet, computer keyboard, solar cells and every radio frequency if ID device (RFID). This makes it an essential element going forward as the world becomes more addicted to gadgets. The growth and rising living standards of people in the emerging economies will drive long-term growth of new customers that will demand more and more electronic gadgets.

*****

Silver’s industrial demand should increase 60% to 666 million ounces per year by 2016 from 487 million ounces in 2010. Current annual mine production is only around 700 million ounces per year growing a few percent annually.

*****

Of a total of fifty billion ounces of silver that have been mined in history, only two ounces (estimate) or 5% remain in above ground inventories available to be bought and sold. This is due to silver being used up in industrial applications in very small quantities, which makes it unprofitable to recycle at today’s prices. A lot of silver is used in minute quantities in industrial products which are used up and discarded without being recycled.

*****

The total amount of silver available to trade in the physical silver market is only about $70 billion versus the total gold market which now exceeds $4.3 trillion. As you can see from these numbers, the total market size of the silver market is only 1.6% of the size of the entire gold market. This lack of liquidity and use of extreme leverage in its respective futures market produces wild volatility in price fluctuations of silver.

*****

You can read the rest of his excellent article right here.

Are you starting to get the picture?

Let us hope that the price of silver stays below 20 dollars an ounce for as long as possible, because once this opportunity is gone we will probably never see it again.

It is important to realize where we are in the greater scheme of things.  The world is moving toward another major financial crisis which will usher in a brief period of deflation.  Unlike many others that are talking about the coming economic collapse, I have always maintained that we are going to see deflation first and then the response to the crisis will give us the rip-roaring inflation that so many talk about.  The following is an excerpt from one of my articles where I talk about this

So cash will not be king for long.  In fact, eventually cash will be trash.  The actions of the U.S. government and the Federal Reserve in response to the coming financial crisis will greatly upset much of the rest of the world and cause the death of the U.S. dollar.

That is why gold, silver and other hard assets are going to be so good to have in the long-term.  In the short-term they will experience wild swings in price, but if you can handle the ride you will be smiling in the end.

During the initial stages of the next major stock market crash, gold and silver will not do very well.  But that is okay.  Dips are buying opportunities.

As the coming economic crisis unfolds, governments and central banks all over the world will desperately attempt to resuscitate the global financial system.  We are going to see money printing and “stimulus packages” on a scale that we have never seen before.  Crazy things will happen with stocks, bonds and currencies.

When the dust finally settles, those that are holding “real money” will be the ones that will be in the best shape.

Mass Carnage: Stocks, Bonds, Gold, Silver, Europe And Japan All Get Pummeled

Car AccidentCan you smell that?  It is the smell of panic in the air.  As I have noted before, when financial markets catch up to economic reality they tend to do so very rapidly.  Normally we don’t see virtually all asset classes get slammed at the same time, but the bucket of cold water that Federal Reserve Chairman Ben Bernanke threw on global financial markets on Wednesday has set off an epic temper tantrum.  On Thursday, U.S. stocks, European stocks, Asian stocks, gold, silver and government bonds all over the planet all got absolutely shredded.  This is not normal market activity.  Unfortunately, there is nothing “normal” about our financial markets anymore.  Over the past several years they have been grossly twisted and distorted by the Federal Reserve and by the other major central banks around the globe.  Did the central bankers really believe that there wouldn’t be a great price to pay for messing with the markets?  The behavior that we have been watching this week is the kind of behavior that one would expect at the beginning of a financial panic.  Dick Bove, the vice president of equity research at Rafferty Capital Markets, told CNBC that what we are witnessing right now “is not normal. It is not normal for all markets to move in the same direction at the same point in time due to the same development.”  The overriding emotion in the financial world right now is fear.  And fear can cause investors to do some crazy things.  So will global financial markets continue to drop, or will things stabilize for now?  That is a very good question.  But even if there is a respite for a while, it will only be temporary.  More carnage is coming at some point.

What we have witnessed this week very much has the feeling of a turning point.  The euphoria that drove the Dow well over the 15,000 mark is now gone, and investors all over the planet are going into crisis mode.  The following is a summary of the damage that was done on Thursday…

-U.S. stocks had their worst day of the year by a good margin.  The Dow fell 354 points, and that was the biggest one day drop that we have seen since November 2011.  Overall, the Dow has lost more than 550 points over the past two days.

-Thursday was the eighth trading day in a row that we have seen a triple digit move in the Dow either up or down.  That is the longest such streak since October 2011.

-The yield on 10 year U.S. Treasuries went as high as 2.47% before settling back to 2.42%.  That was a level that we have not seen since August 2011, and the 10 year yield is now a full point above the all-time low of 1.4% that we saw back in July 2012.

– The yield on 30 year U.S. Treasuries hit 3.53 percent on Thursday.  That was the first time it had been that high since September 2011.

-The CBOE Volatility Index jumped 28 percent on Thursday.  It hit 20.49, and this was the first time in 2013 that it has risen above 20.  When volatility rises, that means that the markets are getting stressed.

-European stocks got slammed too.  The Bloomberg Europe 500 index fell more than 3 percent on Thursday.  It was the worst day for European stocks in 20 months.

-In London, the FTSE fell about 3 percent.  In Germany, the DAX fell 3.3 percent.  In France, the CAC-40 fell 3.7 percent.

-Things continue to get even worse in Japan.  The Nikkei has fallen close to 17 percent over the past month.

-Brazilian stocks have fallen by about 15 percent over the past month.

-On Thursday the price of gold got absolutely hammered.  Gold was down nearly $100 an ounce.  As I am writing this, it is trading at $1273.60.

-Silver got slammed even more than gold did.  It fell more than 8 percent.  At the moment it is trading at $19.57.  That is ridiculously low.  I have a feeling that anyone that gets into silver now is going to be extremely happy in the long-term if they are able to handle the wild fluctuations in the short-term.

-Manufacturing activity in China is contracting at a rate that we haven’t seen since the middle of the last recession.

-For the week ending June 15th, initial claims for unemployment benefits in the United States rose by about 18,000 from the previous week to 354,000.  This is a number that investors are going to be watching closely in the months ahead.

Needless to say, Thursday was the type of day that investors don’t see too often.  The following is what one stock trader told CNBC

“It’s freaking, crazy now,” said one stock trader during the 3 p.m. ET hour as the Dow sunk more than 350 points. “Even defensive sectors are getting smoked. The super broad-based sell off between commodities, bonds, equities – I wouldn’t say it’s panic, but we’ve seen aggressive selling on the lows.”

Unfortunately, this may just be the beginning.

In fact, Mark J. Grant has suggested that we may see even more panic in the short-term…

Yesterday was the first day of the reversal. There will be more days to come.

What you are seeing, in the first instance, is leverage coming off the table. With short term interest rates right off of Kelvin’s absolute Zero there was been massive leverage utilized in both the bond and equity markets. While it cannot be quantified I can tell you, dealing with so many institutional investors, that the amount of leverage on the books is giant and is now going to get covered. It will not be pretty and it will be a rush through the exit doors as the fire alarm has been pulled by the Fed and the alarms are ringing. There is also an additional problem here.

The Street is not what it was. There is not enough liquidity in the major Wall Street banks, any longer, to deal with the amount of securities that will be thrown at them and I expect the down cycle to get exacerbated by this very real issue. Bernanke is no longer at the gate and the Barbarians are going to be out in force.

If we see global interest rates start to shift in a major way, that is going to be huge.

Why?

Well, it is because there are literally hundreds of trillions of dollars worth of interest rate derivatives contracts sitting out there…

The interest rate derivatives market is the largest derivatives market in the world. The Bank for International Settlements estimates that the notional amount outstanding in June 2009 were US$437 trillion for OTC interest rate contracts, and US$342 trillion for OTC interest rate swaps. According to the International Swaps and Derivatives Association, 80% of the world’s top 500 companies as of April 2003 used interest rate derivatives to control their cashflows. This compares with 75% for foreign exchange options, 25% for commodity options and 10% for stock options.

If interest rates begin to swing wildly, that could burst the derivatives bubble that I keep talking about.

And when that house of cards starts falling, we are going to see panic that is going to absolutely dwarf anything that we have seen this week.

So keep watching interest rates, and keep listening for any mention of a problem with “derivatives” in the mainstream media.

When the next great financial crash comes, global credit markets are going to freeze up just like they did in 2008.  That will cause economic activity to grind to a standstill and a period of deflation will be upon us.  Yes, the way that the Federal Reserve and the federal government respond to such a crisis will ultimately cause tremendous inflation, but as I have written about before, deflation will come first.

It would be wise to build up your emergency fund while you still can.  When the next great financial crisis fully erupts a lot of people are going to lose their jobs and for a while it will seem like hardly anyone has any extra money.  If you have stashed some cash away, you will be in better shape than most people.

Crushed Car By UCFFool

Does China Plan To Back The Yuan With Gold And Make It The Primary Global Reserve Currency?

Chinese Renminbi Yuan - Photo by MiLu24What in the world is China up to?  Why are the Chinese hoarding so much gold?  Does China plan to back the yuan with gold and turn it into a global reserve currency?  Could it be possible that China actually intends for the yuan to eventually replace the U.S. dollar as the primary reserve currency of the planet?  Most people in the western world assume that China just wants a “seat at the table” and is content to let the United States run the show.  But that isn’t the case at all.  The truth is that China doesn’t just want to compete with the United States.  Rather, China actually plans to replace the United States as the dominant economic power on the planet.  In fact, China already accounts for more global trade than the United States does.  So what would happen one day if China announced that it was backing the yuan with gold and that it would no longer be using the U.S. dollar in international trade?  It would cause a financial shift so cataclysmic that it is hard to even imagine.  Most of those that write about the “death of the U.S. dollar” usually fail to point out that China is holding a lot of the cards as far as the fate of the dollar is concerned.  China owns about a trillion dollars of our debt, China is the second largest economy on the planet, and nobody uses the dollar in international trade more than China does except for the United States.  Up until now, China has had to use the U.S. dollar in international trade because there has not been an attractive alternative.  But a gold-backed yuan would change all of that very rapidly.

And without a doubt, the Chinese government has already been very busy promoting the use of the yuan in international trade.  In a recent note, John McCormick of RBS Group stated the following…

Financial crises in the US and Europe mean the world needs a new, more stable global reserve currency, and trade in RMB is growing rapidly. In the FX market, for example, our figures show that volumes are now worth around USD 5-6 billion daily – double what they were a year ago.

A number of factors suggest that the Chinese authorities want to make RMB internationalisation happen by 2015.

For China, having a global reserve currency is not just about economics.  It is also about power.

McCormick ended his recent note this way…

China’s new leadership faces a number of problems. The country’s economy is slowing and, although we would expect the rate of GDP growth to pick up a little, it is unlikely to be a steep rebound.

But promoting RMB as a global reserve currency, with all the economic benefits that will bring in addition to exerting more political influence on the global stage, clearly remains high on their agenda.

Similar sentiments were echoed in a recent article in the Wall Street Journal

Beijing is undertaking a long, gradual campaign to establish the yuan as a more market-oriented, international currency. China’s State Council, or cabinet, said in a statement this month that the country would draft a plan to allow the yuan to become fully convertible. Meanwhile, the People’s Bank of China is guiding the currency higher and set the median point of its permitted daily trading band last week at the strongest level ever.

We don’t hear much about these sorts of things in the western media, but the convertibility of the Chinese yuan is a very big deal.  Up until recently, the yuan was only directly convertible into dollars and yen.  But now that is rapidly changing.  So far this year, the Chinese government has entered into currency convertibility agreements with Australia and New Zealand.

So instead of having to change yuan into U.S. dollars to trade with Australia and New Zealand, now China can cut U.S. dollars completely out of the process.

But right now there is nothing that really gives the Chinese yuan a significant competitive edge over the U.S. dollar.  If Chinese authorities truly want the yuan to end up replacing the U.S. dollar as the primary reserve currency of the planet, they need to do something that will make the rest of the world want to use it.

And they could do that by backing the yuan with gold.  In fact, there are persistent rumors that China has been busily preparing for that.

For example, the Economic Policy Journal recently pointed out that Dr. Pippa Malmgren, the President and founder of Principalis Asset Management who once worked in the White House as an adviser to President Bush, is claiming that China has plans to turn the yuan into “a hard, gold-backed currency” that will have a distinct competitive edge over the rapidly depreciating paper currencies that the rest of the globe is currently using…

The most interesting piece of the puzzle is that the Chinese have emerged as the biggest buyers of gold, mainly off-market. They want the yuan to emerge as a hard, gold-backed currency in a world where everyone else has chosen to inflate and devalue.

The recent bilateral currency deals with Australia, France, Russia and Singapore, and many others, reflect this desire to displace the USD as the world’s reserve currency.

It may be an interesting and long race between the Chinese reaching for convertibility and the Western central banks straining credibility.

Other analysts are also fully convinced that the goal of the Chinese is a gold-backed yuan.  The following is what money manager Stephen Leeb told King World News recently

Countries have been battling each other in order to cheapen their currencies. The problem with a cheaper currency is that commodities cost more. So China has decided to opt for a higher currency.

The move in the yuan overnight was one of the most significant upticks I have seen. Like I said, the yuan moved to an all-time high. The yuan has advanced roughly 5% against the US dollar in just nine months. China also imported over 200 tons of gold for the most recent month. That is an extraordinary number. At that rate that’s over 2,400 tons of gold per year on an annualized basis.

This simply speeds up the point at which China will be the largest gold holder in the world. China saw gold come down and they didn’t just buy on the dip, instead they bought as much as the market would give them. And, again, you see the yuan going up so that is making the price of gold even cheaper for the Chinese.

It’s only a matter of time before the Chinese back the yuan with gold. This will push the yuan front and center as a key element in terms of being part of the world’s reserve currency basket. China gets the message. They are doing whatever it takes to establish their dominance in the world, particularly in the commodity arena. Their currency is flying and they are importing as much gold as they possibly can.

And without a doubt, China has been hoarding massive amounts of gold.  Everyone agrees on that.  But what nobody knows is exactly how much gold China currently has stockpiled, because China is not telling anybody.

One recent estimate put China’s gold reserves at more than 7,000 tons of gold, but it could potentially be far higher than that.  When China does finally tell the rest of us how much gold they have, they will probably be just a move or two away from checkmate.

What we do know is that China is importing absolutely enormous amounts of gold right now even though China is also the number one gold producer on the planet.

According to Reuters, more than 223 tons of gold was imported into China from Hong Kong in March.  That smashed the previous record of 114 tons in December.

Overall, Chinese imports of gold from Hong Kong tripled in 2012, and the final number for 2013 is going to absolutely smash what we saw in 2012.

Obviously something is happening.

China is massively hoarding gold at the same time that it is trying to substantially raise the international influence of the yuan.

It doesn’t take a genius to see where all of this is headed.

If China does decide to back the yuan with gold and no longer use the U.S. dollar in international trade, it will have devastating effects on the U.S. economy.  Demand for the U.S. dollar and U.S. debt would drop like a rock, and prices on the things that we buy every day would soar.  At that point you could forget about cheap gasoline or cheap Chinese imports.  Our entire way of life depends on the U.S. dollar being the primary reserve currency of the world and being able to import things very inexpensively.  If the rest of the world (led by China) starts to reject the U.S. dollar, it would result in a massive tsunami of currency coming back to our shores and a very painful adjustment in our standard of living.  Today, most U.S. currency is actually used outside of the United States.  If someday that changes and we are no longer able to export our inflation that is going to mean big trouble for us.

So keep an eye on China, and look out for any news about the yuan.

It won’t happen next week or next month, but eventually we could see China back the yuan with gold.

When that happens, it is going to be a complete and utter financial disaster for the United States.

 

Are We On The Verge Of Witnessing The Death Of The Paper Gold Scam?

Gold BarsThe legal claims on physical gold far exceed the amount of physical gold that the banks actually have by a very, very wide margin.  And right now the bankers are scared out of their wits because their warehouses are being drained of physical gold at a frightening rate.  So what happens when their physical gold is gone but they still have lots and lots of people with legal claims to gold?  When that moment arrives, it will represent the end of the paper gold scam.  Many believe that the recent takedown of the price of paper gold was a desperate attempt by the bankers to put off that day of reckoning, but it appears to have greatly backfired on them.  Instead of cooling off demand for precious metals, it has unleashed a massive “gold rush” all over the globe.  Meanwhile, word has been spreading among wealthy families in both North America and Europe that they had better grab their physical gold out of the banks while they still can.  This is creating havoc in the financial community, and at least one major international bank has already declared that it will only be settling those accounts in cash from now on.  The paper gold scam is starting to unravel, and by the time this is all over it is going to be a complete and total nightmare for global financial markets.

For years it has been widely known that the promises that banks have made regarding their gold far exceed their actual ability to deliver, but we have never reached a moment of such crisis before.

Posted below are quotes from people that know precious metals far better than I do.  What these experts are saying is more than a little bit disturbing…

-CME President Terry Duffy: What’s interesting about gold, when we had that big break two weeks ago we saw all the gold stocks trade down significantly, we saw all the gold products trade down significantly, but one thing that did not trade down, was gold coins, tangible real gold. That’s going to show you, people don’t want certificates, they don’t want anything else. They want the real product.

-Billionaire Eric Sprott: So we see all of these paper (trading) volumes going through that bear absolutely no relationship to what’s going on in the physical markets. As you know I have always been a proponent of the fact that supply in the gold market was way less than demand, and by a very large factor. I think demand exceeds supply by at least 60%. The central banks are surreptitiously supplying that gold, and ultimately they will be running on fumes.

When we hear about the LBMA not willing to deliver gold, and JP Morgan’s inventories at the COMEX have gone from 2.4 million (ounces) down to 160,000 ounces, it just makes you realize that all of this paper trading means nothing. It’s the real physical market that you have to rely on.

-JS Kim: FACT #1: COMEX gold vaults were recently drained of 2 million ounces of physical gold in one quarter, the largest withdrawal of physical gold bullion from COMEX vaults in one quarter during this entire 12-year gold and silver bull. There has been speculation about the reasons that spurred these massive withdrawals of gold from COMEX vaults, but the most reasonable speculation is that no one trusts the bankers to hold on to their physical gold anymore, especially in light of Fact #2. Note below, that both registered AND eligible stocks of gold had heavily declined in recent months. Such an event signals a general distrust of the banking system from everyone holding gold in registered COMEX vaults.

FACT #2: One of the largest European banks, ABN Amro, defaulted on their gold contracts and informed their clients that they would only settle their gold bullion contracts in cash and not in physical. So much for the supposed legality of financial contracts as a “binding” contract. So whether Fact #1 caused Fact #2 or vice versa is irrelevant. What IS apparent is that the level of trust in bankers to safekeep physical gold and physical silver is disappearing, as it should be, and as it should have already been for years now. But truth always takes some time to catch up to banker spread lies and that is what is happening now. I have been warning people never to trust bankers in deals involving gold and silver for years now, as in this article I wrote nearly four years ago informing the public that the SLV and GLD are likely a banker invented scam as well.

FACT #3: Silver fraud whistleblower and London trader Andrew Maguire stated that the LBMA was having trouble settling gold contracts in bullion as well and stated that institutions that asked for physical settlement “were told they would be cash settled instead by a bullion bank.” In plain English, this is a default. So Andrew Maguire reported that the LBMA had already gone into default. In light of Fact #1 and Fact #2, the dominoes were starting to tumble and the house of cards that the bankers had built in gold and silver paper derivatives to deceive and hide the true fundamentals of the physical gold and physical markets from the entire world was rapidly starting to crumble. A financial earthquake of magnitude 2.5 was quickly threatening to evolve into one of the biggest financial earthquakes of all time in which the world’s confidence in all global fiat currencies would effectively have a well-deserved funeral.

-Jim Sinclair: I think the reality is the supply situation is extremely volatile at this point, and even discussing it is like rubbing a raw nerve to the people who are in charge. The amount of discussion on the subject of warehouse supply, supply that is represented by the gold leases, indicated to the central planners that the demand for physical was going to continue to effect the exchanges.

Although they did not expect any grandstand delivery, the mere continued draining of physical inventories was threatening the very functioning of the paper exchange. That threatening of the paper exchange and its ability to continue functioning is really taking off the blinders and revealing the truth behind the critical question, ‘Where is the gold?’

The question now is, ‘Where has the gold gone?’ Who has all of this gold? Because of the nature of gold leasing, all of this gold has been purchased and it has gone somewhere. The reality of the empty vaults reveal that the gold has gone missing.

-Ronald Stoeferle: We’re seeing this rush to physical gold not only in the retail market, but also for the institutional players…[it’s] just overwhelming…I [estimate] a 130-to-1 [ratio of paper to physical gold]…and I think in the last week we were really close to [triggering] a default of the paper market.

-Gerhard Schubert, head of Precious Metals at Emirates NBD: I have not seen in my 35 years in precious metals such a determined and strong global physical demand for gold. The UAE physical markets have been cleared out by buyers from all walks of life. The premiums, which have been asked for and which have been paid have been the cornerstone of the gold price recovery. It is very rare that physical markets can have a serious impact on market prices, which are normally driven solely by derivatives and futures contracts…

I did speak during the week with several refineries in the world, of course including the UAE refineries, and the waiting period for 995 kilo bars is easily 2-3 weeks and goes into June in some cases. A large portion of the 995 kilo bars in the UAE goes normally into the Indian market, but a lot of the available 995 kilo bars are destined for Turkey, at this time. We heard that premiums paid in Turkey have reached anything between US $ 20 and US $ 35 per ounce.

-James Turk: Another indication of the demand for large bars is the huge drawdown in the gold stock in COMEX warehouses. It is noteworthy that COMEX reports show the drawdown is largely the result of dealers removing their inventory, their working stock. When that happens, you know the availability of supply is constrained.

What all of this means, Eric, is one thing. If the central planners want to keep the precious metals at these low prices, to meet the demand for physical metal they will need to empty more metal from central bank vaults, or borrow metal from the ETFs as some have suggested is happening. Otherwise, the central planners will have to step back and stop their intervention, thereby letting the price of gold and silver rise so that demand tapers off, bringing demand and supply of physical metal back toward some kind of balance.

We’ve seen this same situation several times over the last twelve years. It is what I have been calling a “managed retreat.” Despite the current weakness, I firmly believe we have again entered a critical period where the central planners will need to retreat once again in order to let the gold and silver prices climb higher.

-The Golden Truth: And then I get a call from a close friend in NYC last Friday.   His career has been in private wealth management in the private bank department of the Too Big To Fail banks.  He’s been looking for work and chats with old colleagues all the time.  He called my Friday and told me he just got off the phone with a very high level private banker from a big Euro-based TBTF bullion bank, but who was at JP Morgan until about six months ago.

This guy told my friend that there is a scramble by many very wealthy European families/entities to get their 400 oz bars out of the big bank vaults. He knows this personally, for a fact.  He said the private banker community is small over there and the big wealthy families all talk to each other and act on the same rumors/sentiment.  The Bundesbank/Fed and the ABN/Amro situations triggered this move.  He knows for a fact JPM tried to calm fears about 3 months ago by sending a letter to it’s very wealthy clients assuring them their bars were safe, in allocated accounts.  He said right now those same families are walking into the big banks like JPM and demanding delivery of their bars or threatening to take their $100’s of millions in investment portfolios to competitors.  His wording was “these people are putting a gun to the heads of private banks and demanding their gold.”

I know this information is good because I know my friend’s background and when he tells me his source is plugged in, the guy is plugged in. Not only that, my friend’s source said that there’s no doubt that someone like a John Paulson, not necessarily specifically him, but entities like him or it may include him, have held a gun to GLD and demanded delivery of physical in exchange for their shares.

Regarding the Bundesbank/Fed situation, recall that the Bundesbank asked to have some portion of its gold sitting – supposedly – in the NY Fed vault in NYC sent back Germany. The total amount is 1800 tonnes.  After behind the scenes negotiations, the Fed agreed to ship 300 tonnes back over seven years.  To this day, the time required for that shipment has never been explained.  Venezuela demanded the return of its 200 tonnes held in London, NYC and Switzerland and received it all within about four months.

And regarding the ABN/Amro situation.  ABN/Amro offered a gold investment account product that offered physical delivery of the gold in the investment account when the investor cashes out.  About a week before the gold price smash, ABN sent a letter to its clients informing that the physical delivery of the bullion was no longer available and that all accounts would be settled with cash at redemption.

I believe it was these two events that triggered the big scramble for physical gold by wealthy families/entities who were suspicious of the integrity of their bank vault custodial arrangement anyway.

*****

So what does all of this mean?

It means that we are entering a period when there will be unprecedented volatility for precious metals.  There will be tremendous ups and downs as this crisis plays out and the bankers try to keep the paper gold scam from completely unraveling.

Meanwhile, nations such as China continue to stockpile gold as if the end of the world was coming.

According to Zero Hedge, Chinese gold imports set a brand new all-time record high in March…

Quite the contrary: as export data released by the Hong Kong Census and Statistics Department overnight showed, Chinese gold imports in March exploded to an all time record high of 223.5 tons.

And the number for April is expected to be even higher.

Does China know something that the rest of us do not?

We are also seeing a rapid decoupling between spot prices and physical prices.  In fact, it is quickly getting to the point where the spot price of gold and the spot price of silver are becoming irrelevant.

For example, demand for silver coins has become so intense that some dealers are charging premiums of up to 30 percent over spot price for silver eagles.

That would have been regarded as insane a few years ago, but people are now willing to pay these kinds of premiums.  People are recognizing the importance of actually having physical gold and silver in their possession and they are willing to pay a significant premium in order to get it.

We are moving into uncharted territory.  The paper gold scam is rapidly coming to an end.  In the long-term, this will greatly benefit those that are holding significant amounts of physical gold and silver.

The Beginning Of The End by Michael Snyder

UNPRECEDENTED Shortages Of Ammo, Physical Gold And Physical Silver

Panic Button By John On FlickrAll over the United States we are witnessing unprecedented shortages of ammunition, physical gold and physical silver.  Recent events have helped fuel a “buying frenzy” that threatens to spiral out of control.  Gun shops all over the nation are reporting that they have never seen it this bad, and in many cases any ammo that they are able to get is being sold even before it hits the shelves.  The ammo shortage has already become so severe that police departments all over America are saying that they are being told that it is going to take six months to a year to get their orders.  In fact, many police departments have begun to trade and barter with one another to get the ammo that they need.  Meanwhile, the takedown of paper gold and paper silver has unleashed an avalanche of “panic buying” of physical gold and physical silver all over the planet.  In the United States, some dealers are charging premiums of more than 25 percent over the spot price for gold and silver and they are getting it.  People are paying these prices even though they are being told that delivery will not happen for a month or two in many cases.  Some dealers are feverishly taking as many orders as they can, and they are just hoping that they will be able to get the physical gold and silver to eventually fill those orders.  Personally, I have never seen anything like this.  If things are this tight now, what is going to happen when the next major financial crisis strikes and people really begin to panic?

The shortages and rationing of ammunition at gun shops all over America just seem to keep getting worse.  The following is from an article by a gun owner down in Texas named Brad Meyer

If you’d like to see a normally sullen sales clerk chortle with derisive pleasure, just walk into just about any gun range, sporting goods store or mass merchandiser and try and buy a couple boxes of .22 ammunition.

Gun enthusiasts are up in arms about a nationwide shortage of ammunition. Handgun ammo in general is particularly difficult to find – and when you do find it, there are restrictions on the amount you can buy and how much you’re going to be paying for it.

While the list of hard to find ammo is long, .22 long rifle and 9mm handgun ammunition are particularly difficult to find in quantity. And the few places that have it are charging a premium rate and usually limiting purchases to one box, per person, per day.

Many gun owners try to find ammunition by going on the Internet, but things have gotten so tight that now any ammo that becomes available online is often gone within seconds

There are websites where people across the country post links to where ammunition is available – and it sells out within seconds. Not minutes or hours – seconds.

Unfortunately, all of this demand is also driving up prices.  Just check out what Meyer says is happening to the price of standard .22 ammo…

The demand is driving up the cost of ammunition. Six months ago, standard .22 ammo – the most common type of bullet produced in the world – could be had in bulk for around five cents apiece. It is now going for 50 cents or more on some websites – and people are paying it.

But this shortage is not just affecting private citizens.  According to Newmax, police departments all over the nation are dealing with ammo shortages unlike anything that they have ever seen before…

Sheriff Anthony DeMeo of Nye County, Nev., was told his department’s regular order of 50,000 rounds could take up to a year to arrive.

“This is the first time ever I’ve heard that there’s a problem with a law-enforcement agency getting ammo for their agency,” DeMeo told The Las Vegas Sun.

These departments are not alone. Law enforcement agencies in Oklahoma, Wisconsin, Arizona, and Georgia are among many that are having to limit how much they give their officers due to the shortage.

Could you imagine waiting for “up to a year” to get more ammunition?

A recent article posted on CNSNews.com had some more examples of police departments that are reporting that there is a massive wait to get more ammo…

Chief Pryor of Rollingwood, Texas says of the shortage:

“We started making phone calls and realized there is a waiting list up to a year.  We have to limit the amount of times we go and train because we want to keep an adequate stock.”

“Nobody can get us ammunition at this point,” says Sgt. Jason LaCross of the Bozeman, Montana police department.

LaCross says that manufacturers are so far behind that they won’t even give him a quote for an order.

“We have no estimated time on when it will even be available,” LaCross says.

This is insane.

What in the world could be causing such an ammo crunch?

Well, certainly the demand for guns and ammo has been trending up in recent years – especially since Barack Obama was elected.

But that doesn’t fully account for the shortages that we are witnessing at the moment.

So what is going on?

Well, some people believe that the federal government is responsible.  It has been reported that they have signed contracts to purchase “up to” 1.6 billion rounds of ammunition.  According to Forbes, this amount of ammunition would be enough to fight a “hot war” in America for 20 years

The Denver Post, on February 15th, ran an Associated Press article entitled Homeland Security aims to buy 1.6b rounds of ammo, so far to little notice.  It confirmed that the Department of Homeland Security has issued an open purchase order for 1.6 billion rounds of ammunition.  As reported elsewhere, some of this purchase order is for hollow-point rounds, forbidden by international law for use in war, along with a frightening amount specialized for snipers. Also reported elsewhere, at the height of the Iraq War the Army was expending less than 6 million rounds a month.  Therefore 1.6 billion rounds would be enough to sustain a hot war for 20+ years.  In America.

Could this be a way that the Obama administration is trying to restrict the amount of ammo that gets into the hands of private citizens?

That is what some people are suggesting.

According to talk radio show host Michael Savage, the ammo contracts that the federal government has signed give them priority over all other purchasers…

What Homeland Security is doing here is they’re issuing a contract to buy up to that amount of ammo if they want it…

It’s a way to control the amount of market that’s available on the commercial market at any time.

If they go to the ammo manufacturers and say give me 50 million rounds, give me another 30 million rounds… if they periodically do this in increments, they’re going to control how much ammo is available on the commercial market.

As part of their contract it stipulates in there that when the government calls and says give us another quantity, that everything they make has to go to the government priority one before any of it goes to the commercial market.

So, if  they get nervous, all they have to do is use that contract that they have in place… and they just say ‘give us some more.’

So whenever the government wants to tighten the supply of ammunition, all they have to do is invoke their contracts and order more for themselves.

Meanwhile, Obama appears to be doing other things to restrict the amount of ammo that gets into the hands of private gun owners.

For example, there are reports that the Obama administration plans to use executive orders to greatly restrict the importation of ammo from overseas.

So if anything, the shortage of ammunition is only going to get worse, not better.

Meanwhile, the “panic buying” of physical gold and physical silver that we have seen lately has really run down inventories.

According to Reuters, demand has become so intense that the U.S. Mint has suspended sales of gold coins for the first time since 2009…

The U.S. Mint said it has suspended sales of its one-tenth ounce American Eagle gold bullion coins as surging demand after bullion’s plunge to two-year lows depleted the government’s inventory. This marks the first time it has stopped selling gold product since November 2009, dealers said.

At the same time, precious metals dealers all over the country are scrambling to meet the voracious demand that they have been seeing this month.  The following is an excerpt from a letter that the CEO of Texas Precious Metals recently sent out to his customers…

The physical silver market is, in a word, ugly. There is no telling at this point when mint inventories will return to normal, but you can be sure it will not happen within the next 8 weeks. Most dealers, at this point, are selling their current customer demand forward, meaning they are selling product they do not presently have, expecting to pull from future mint allocations. Consequently, future allocations will face pressure from today’s demand. It is not my intent here to comment on the business practices of other companies, but I will say that no one can possibly predict future allocations at the time. The US mint, for example, releases its allocations weekly, and until then, dealers have no insight into allocation levels. Last week, we turned away business in excess of 100,000 ozs of silver because of stock depletion. However, we stand by the notion that it is better to lose a sale than lose a customer by delaying delivery two months (or more).

A similar thing is happening over in Asia.  According to the Financial Times, soaring demand has caused a shortage of gold at the Hong Kong Gold & Silver Exchange Society…

Haywood Cheung, president of the Hong Kong Gold & Silver Exchange Society, said the exchange had effectively run out of most of its holdings as members looked to meet a shortfall in supply amid rampant retail demand for gold products.

“In terms of volume, I haven’t seen this gold rush for over 20 years,” he told the Financial Times on Monday, adding that the exchange only had around twenty 1kg bars, and 100 five-tael bars left in its inventory. “Older members who have been in the business for 50 years haven’t seen such a thing.”

But most disturbing of all is what Jim Sinclair told King World News recently.  Apparently his friend went to get his gold out of a Swiss bank the other day and they refused to give it to him…

A person that I know with significant deposits in one of the primary Swiss banks, in allocated gold, wanted to take out his gold and was just refused on the basis of directives from the central bank….

They told him the amount was in excess of 200,000 Swiss francs and the central bank had instructed them not to do it because it has to do with anti-terrorism and anti-money laundering precautions.

I really wonder whether those are precautions or whether the gold simply isn’t there. Now you tell me that a London delivery has basically failed. It has to raise our suspicions that the lack of physical gold behind the paper gold is literally so severe that we are coming to understand that it is in fact not there.

The gold that people think is stored is not stored, and the inventory of the warehouses for exchanges may not be holding deliverable gold. There has always been speculation about whether or not the physical gold the US claims to store is in fact in those vaults.

The greatest train robbery in history might be all of the gold, and it would only be something like we have described above that would happen right before gold makes historic highs.

There simply is no gold behind the paper. One example is AMRO, a second is your example with Maguire, and a third is my dear friend who was refused his gold on the basis that its value was too high. Remember this friend of mine had his gold in an allocated account in storage at a major Swiss bank. I repeat, there is no gold.

So are we going to see more of this?

Will it soon become evident that there is simply not enough physical gold to cover all of the promises that the banks have made?

Jim Sinclair sure seems to think so.

In another interview, John Embry expressed similar sentiments to King World News…

This gets back to the tip of the iceberg when the Dutch Bank ABN AMRO came out and literally said that if you have allocated gold with us, you can’t have it.

That, to me, is a default, and it gets back to what Jim Sinclair related when one of his friends went to a Swiss bank and couldn’t get his allocated gold.  I mean that’s preposterous.  If it’s allocated it should be there, but it’s clearly not there.  I think this is the beginning of the end of the massive Ponzi scheme in paper gold.  I have been talking about this for some time, and it will have an enormous impact on future gold and silver prices.

When it becomes widely known that all of the people who think they own gold in fact don’t own gold, that it’s been hypothecated and re-hypothecated so many times that there are 100 claims for every single ounce of physical gold, that is when the prices of gold and silver will really go berserk to the upside, and at that point the shorts will have serious problems.”

If those that helped engineer the recent takedown of paper gold and silver were hoping to scare people away from physical gold and silver, then they failed miserably.  For even more on this, please see my recent article entitled “10 Signs The Takedown Of Paper Gold Has Unleashed An Unprecedented Global Run On Physical Gold And Silver“.

All of this is just another example why I encourage people to get prepared while times are still relatively good.

Once disaster strikes, it may be too late to get the things that you need.

Right now there are a whole lot of people out there wishing that they had stocked up on ammo when it was much cheaper and much more readily available.

We are moving into a time when everything that can be shaken will be shaken.  Use the stability provided by the false bubble of economic hope that we are experiencing right now as an opportunity to get prepared.  The next major wave of the economic collapse is rapidly approaching and time is running out.

 

10 Signs The Takedown Of Paper Gold Has Unleashed An Unprecedented Global Run On Physical Gold And Silver

A Global Run On Physical Gold And Silver Has BegunThe crash of the price of paper gold on Monday has unleashed an unprecedented global frenzy to buy physical gold and silver.  All over the planet, people are recognizing that this is a unique opportunity to be able to acquire large amounts of gold and silver at a bargain price.  So precious metals dealers now find themselves being overwhelmed with orders in the United States, in Canada, in Europe and over in Asia.  Will this massive run on physical gold and silver soon lead to widespread shortages of those metals?  Instead of frightening people away from gold and silver, the takedown of paper gold seems to have had just the opposite effect.  People just can’t seem to get enough physical gold and silver right now.  Those that wish that they had gotten into gold when it was less than $1400 an ounce are able to do so now, and it is absolutely insane that silver is sitting at about $23 an ounce.  If the big banks continue to play games with the price of gold, we are going to see existing supplies of physical gold and silver dry up very quickly.  And once reports of physical shortages of gold and silver become widespread, it is going to absolutely rock the financial world.  But this is what happens when you manipulate free markets – it often has unintended consequences far beyond anything that you ever imagined.

The following are 10 signs that the takedown of paper gold has unleashed an unprecedented global run on physical gold and silver…

#1 According to Zero Hedge, the U.S. Mint set a new all-time record for the number of gold ounces sold on Wednesday…

According to today’s data from the US Mint, a record 63,500 ounces, or a whopping 2 tons, of gold were reported sold on April 17th alone, bringing the total sales for the month to a whopping 147,000 ounces or more than the previous two months combined with just half of the month gone.

#2 Precious metals dealers all over the United States are having a really hard time keeping up with demand right now.  According to Chris Martenson, many are warning customers to expect waiting times of five to six weeks at this point…

In the U.S., all of the dealers I talk to are reporting huge demand and brisk buying. Silver in any form is quite hard to come by unless you want to pay premiums of 20%+ per ounce above spot price. Delivery times are 5 to 6 weeks out now that’s an unusual situation.  If this recent slam was designed to scare people away from gold, it did not have that desired outcome; in fact, just the opposite.

#3 Individual dealers all over the country are confirming that we are seeing a voracious appetite for precious metals at the moment.  For example, the following is what a spokesperson for JM Bullion had to say…

We still have certain things in stock, like 10 oz bars, while others, like Silver Eagles, are a bit of revolving inventory.

The shipments are going out as soon as inventory comes in.

Our main challenge right now is actually getting the silver into the boxes and shipped out – we have been experiencing astounding volume.

This appears to be a widespread phenomenon.  Just check out what other dealers are reporting

“There has been a marked increase in demand since the plunge,” said Mark O’Byrne, executive director at Dublin-based investment and bullion specialist GoldCore, referring to the drop in gold prices seen Friday and Monday. Gold futures lost more than $200 an ounce, or over 13%, on those two days. They were at $1,392 an ounce, moving higher ahead of the close on Thursday.

GoldCore has seen more buying than selling on Wednesday and Thursday, with buy orders “lumpier and from high net worth clients, and with most of the selling in small orders of less than 50 ounces, said O’Byrne.

On Wednesday, David Beahm, executive vice president at Blanchard & Co., said his precious-metals investment firm has seen “2008-like demand” for gold since Monday.

#4 Large international banks are also experiencing tremendous demand for physical gold and silver by customers right now.  The following is what Keith Barron told King World News about what he is hearing…

At the Bank of Nova Scotia in Toronto the gold window has been absolutely swamped. I have confirmed there were people lined up in droves recently for multiple-hours at a time to buy gold and silver bars and coins….

I then confirmed with UBS today in Zurich, Switzerland, that they are experiencing exactly the same thing. They told me people are waiting in long lines for bullion related bars and coins. The physical market is incredibly tight, and there is a huge buying opportunity right here.

The damage in gold will not be long-term because physical supply is already drying up. Asian countries have been aggressively buying gold. This really is an unprecedented opportunity for investors. This takedown in the metals has created incredible demand for both gold and silver, and anyone who wants to unload dollars or euros and put them into gold because they don’t trust the currency, now is the time to do it.

#5 The demand for physical gold and silver is heating up over in Europe as well.  For example, the following is from an emergency message posted on the website of a precious metals dealer in the UK…

Due to the unprecedented demand triggered by the recent fall in the Gold Price we are currently not able to guarantee Next Day Delivery of orders.

We anticipate that all orders will be delivered within 7 days of receipt by us.

Whilst we appreciate that these delays are frustrating for our customers we would like to stress that all accepted orders are guaranteed at the order price and will be dispatched as soon as possible.

It is necessary for all of our staff to be utilised in fulfilling orders and we ask for your cooperation by not calling us to query delivery times. If you do need to contact us, please do so by e-mail and we will endeavour to respond within 48hrs.

#6 On the other side of the globe, demand for precious metals is skyrocketing as well.  According to Bloomberg, people are “running through the gate” to get gold in Australia…

Gold sales from Australia’s Perth Mint, which refines nearly all of the nation’s bullion, surged after prices plunged, adding to signs that the metal’s slump to a two-year low is spurring increased demand.

“The volume of business that we’re putting through is way in excess of double what we did last week,” Treasurer Nigel Moffatt said by phone, without giving precise figures. “There’s been people running through the gate.”

#7 Reuters is reporting that customers are waiting for up to three hours to buy gold in Japan…

A week ago, as the yen-denominated price neared a new peak, jewelry stores and gold merchants across Japan saw long lines of mostly older Japanese looking to cash in on unwanted jewelry and other items that they had held for years.

But on Tuesday, buyers outnumbered sellers by a wide margin. At Ginza Tanaka, the headquarters shop of Tanaka Holdings, gold buyers waited for as long as three hours for a chance to complete a transaction.

#8 According to a Chinese article quoted by the Blaze, there is a mad rush to buy gold in China right now…

People have to rush to buy gold … gold bullion out of stock yesterday, investors yesterday to spend as much as 600 million yuan to buy 20 kilograms of gold bars

The mad pursuit gold insufficiency is not just a game for the rich. Yesterday, the Yangcheng Evening News reporter learned from the East flowers to Bay store, many growers, pork traffickers, fishmonger recently put down his job went straight to the mall to buy gold.

#9 According to Reuters, dealers in Singapore are having significant trouble finding enough of a supply to keep up with the intense demand for gold that has erupted this week…

“People are actually buying everything, gold bars, gold coins. People are rushing to get a hand on it. We have a problem meeting the demand because we are unable to get new supply,” said Brian Lan, managing director of GoldSilver Central Pte Ltd in Singapore.

#10 Bloomberg is reporting that over in India people are “flocking to stores” to purchase gold jewelry and coins…

Gold buyers in India, the world’s biggest consumer, are flocking to stores to buy jewelry and coins, betting a selloff that plunged bullion to a two-year low may be overdone.

“My daughter is just six months old, but I think it is never too early to buy gold,” said Sharmila Shirodkar, a 28- year-old housewife, while displaying a new pair of earrings she bought from a store in Mumbai’s Zaveri Bazaar. “I had been asking my husband every day if prices will go down more. I couldn’t wait anymore.”

If the big banks were trying to scare people away from gold and silver by crashing paper prices for those metals then they have utterly failed.

Instead of being frightened away, the global appetite for physical gold and silver is now more voracious than ever.

If the prices for gold and silver stay this low, we are eventually going to start seeing some very serious shortages in the marketplace.

And once reports of shortages of the actual physical metals become widely circulated, it will cause an “adjustment” in the marketplace that will shock everyone.

So hold on to your hats.  We are entering a period of time when there will be unprecedented volatility for the prices of precious metals.  It will be quite a roller coaster ride, but if you can handle the ups and downs it will be worth it in the end.

They Have Unleashed A Frenzy To Get Gold And Silver

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