One Giant Cluster Ponzi

September 22, 2014

“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.”

-H. L. Mencken

Recently, The U.S. Treasury ramped up war games via financial sanctions aimed at Russia. The EU is part and parcel to the operation. These interventions are a continuation of the age old warfare referred to as the “currency wars”.  Jim Rickards’ recent book on the topic chronicles the use of this tactic.

In many ways, the U.S. Federal Reserve was spawned in the spirit of interference and intervention before and during World War I.

The more things change the more they stay the same.

Technology has made large financial trusts both more efficient and more fragile. However, electronic security infrastructure has never been tested in true world sovereign crisis.

And we know that there is a massive lack of redundancy underlying the systems that fuel our just in time “modern” existence. From basic price discovery in securities of all types to the card machines that run fuel pumps and the credit lines that pay the tankers

We are indeed skating over the thin ice.

Of course, lurking further below the surface is the ability and willingness - from academia across the political spectrum - to print what it takes to keep the banks alive - in the spirit of the domestic popular good.

At a certain point war creates enough anxiety that panic becomes part of the narrative.  Many believe that can't happen because the system has become too adept at protecting the true hidden story, the real interests. Or that the rules can be changed - perpetually. 

Think about the events leading up to Lehman...

Pick any bank today, apply true GAAP, or real life accounting standards...and you get another Lehman moment. 

The financial elite, the media, and a large portion of the political class truly believe that we can print whatever and whenever we want without consequence. And that we should always do more?

Hence the direct printing trial balloons released last week by "Foreign Affairs"; to wit:

To some extent, low inflation reflects intense competition in an increasingly globalized economy. But it also occurs when people and businesses are too hesitant to spend their money, which keeps unemployment high and wage growth low. In the eurozone, inflation has recently dropped perilously close to zero. And some countries, such as Portugal and Spain, may already be experiencing deflation. At best, the current policies are not working; at worst, they will lead to further instability and prolonged stagnation.


Governments must do better. Rather than trying to spur private-sector spending through asset purchases or interest-rate changes, central banks, such as the Fed, should hand consumers cash directly. In practice, this policy could take the form of giving central banks the ability to hand their countries’ tax-paying households a certain amount of money.

The government could distribute cash equally to all households or, even better, aim for the bottom 80 percent of households in terms of income. Targeting those who earn the least would have two primary benefits. For one thing, lower-income households are more prone to consume, so they would provide a greater boost to spending. For another, the policy would offset rising income inequality.

The powers that be have all the bullets anyway. And our collective intelligence has been dummied down through the years of easy money and free comforts.

We need war to, politically and literally (in terms of Treasury note collateral), justify more printing.

With the real economy on life support, it is just a matter of time.

When the bond market begins to roll over, to the financial mainstream's shock and horror, institutions will finally begin the desperate hunt and return to non-paper safe haven collateral.

This is where paper ’securities’ are replaced with physical. The intangible will be squeezed into to the tangible. 

The biggest banks are well positioned to take advantage of a massive move higher in either metal. Ownership of secured metal unencumbered is tiny. It is worse than unpopular. Eventually, some one has to be willing to sell for all the dollars.

Maybe you get an influx of new investors initially; those who hang on the desperate belief that this time will be different.

But most of the influx of new investment demand will be of the pure safe haven variety. It will come out of fear - fast and furious.

At what price will the largest holders - the very institutions that hold or control the most - be willing to sell?

Following that, it is most likely a moot point. The metals go 'no bid' as a matter of domestic or international security.

Simultaneously, the greatest wealth transfer will occur not by the confiscation (not of precious metals) but the trillions of dollars of low hanging fruit in the form of pensions, retirement accounts, money market funds, and certificates of deposit.

Maybe they give the illusion of a choice, as a way you can support the next war effort to fight the financial terrorist from the Far or Middle East.

There isn't enough out there to call in any official capacity.

Precious metals will merely be at the top of the pyramid, above the myriad of whatever is physical and isn't tied down.

The flipside to infinite dollars will be the endless search for something to trade them for.   Ultimately, the dollar loses purchasing power because a credit freeze (eventual reality) will force a flood of government spending to keep the masses quiet.

Helicopter euphemisms were created intentionally.

The Treasury and Fed are so enmeshed that we are politically beyond the point of nationalizing. You can be sure that the main issues will be shrouded by the drums of war, if not actual bombing, and a cascade of false - one great giant false flag.

That is the great tragedy. The ultimate paradox.

We have access and the wherewithal to accomplish and achieve, to expand upon the luck of the previous two centuries and to expand the moral circle without desperate and reactive intervention.

What we have now, in large part the result of the great consolidation of power by the few via the abuse of yet another fiat reserve currency, is a massive ponzi giving rise to false flags everywhere you look, from disease, to technology, government and, especially, a bought and paid for political system.

Prices will go up when they are called in to make the transition. Nothing can be done about it.  The damage will not be reflatable. We will come out on the other side unguided.

It is just a matter of time and a matter of how imaginative an individual can be about preparing or envisioning the way this breakdown would likely manifest. 


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Peru became the world’s largest producer of silver in 2012.