Shadowstats’ John Williams Expects Hyperinflation Within Months

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Recommended Video:




It seems that many commentators / interviewers doubt these serious predictions simply based on the fact that consequences are enormous, basically they are saying "but how can that be possible that's really bad!" They have child like faith in central bankers to fix everything based not on logic but simply because things have been good for a long time, so things should therefore remain good, but they simply don't look at a big enough picture and avoid facts, logic and basic mathematics.

There is simply no logical arugment against this coming financial disaster.

Let’s take this seriously with a sober mind.

Financial advice from fish & chip wrappings

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After a busy day my youngest son and I picked up some take-a ways for dinner, that good old kiwi favourite of fish & chips, I noticed in the newspaper wrapping a big picture with gold bars and that caught my attention.

The article was called: “Gold Plated Investments?” by Chris Worthington, New Zealand Herald, 23rd November 2010. With a bold statement highlighted: “History proves protecting wealth by buying gold is folly."

I’m not sure how much history Mr Worthington has read, at a guess I would say not much. I did a Google search and found the source of the article on the Gareth Morgan web page
Unfortunately there is no place to leave a comment, also I could not help but notice there is only a button for “Like” at the bottom of the article but no "dis-like" button, wow.. this is a rose coloured web page! (Are you happy or.. happy with this article it's your choice)

Well I have this blog so will vent here instead:
Worthless paper moneyHistory is littered with the debris of fiat money failures, that is to say money with no backing of hard assets like gold. There is not one fiat currency that has survived long term, not one! Yet gold is still gold and still worth something while you can’t say that about paper money when it fails. So on the matter of history proving that protecting wealth by buying gold is folly, I would invite Mr Worthington to read about Weimar Germany before World War II or Argentina in 2001  or Zimbabwe or any paper currency in the history of the world that has been given enough time and rope to hang itself with.

Bundles of Zimbabwe currency
Some people might say, Zimbabwe? What has a banana republic got to do with the US dollar for example? Everything! The US is following the same financial principles of Zimbabwe and I believe that Zimbabwe is a warning to the world and not something to laugh about, they ran out of money to meet their commitments and instead of changing and being honest about fixing things they printed money instead. How is that different from what the US is doing? After hyper inflation the Zimbabwe dollar was replaced with a new version and the old one became worthless, so that currency will never ever become more valuable compared to gold because it is extinct along with any saving in that denomination.

Below is a link to a nice quick review of nine failed currencies as an example:
http://www.mint.com/blog/finance-core/hyperinflation-the-story-of-9-failed-currencies/

This is just a small sample! In-fact according to Standard and Poor’s between 1975 and 2005 no less than 35 national currencies have failed (43 if you count the repeat offenders) In all the above examples Gold is and will always be more valuable, so I don’t think Mr Worthington is looking at a broad enough picture.

Another example Mr Worthington makes as follows:
‘New Zealand gold investors might be surprised to learn that gold, in NZD terms, is actually down some 12 per cent from the peak in March last year”
First, people who are gold investors would not be surprised about that at all, second this seems an extremely narrow point against gold, why did Mr Worthington not publish the gold chart in NZD like I have below? Because it would obviously make his point well… seem pointless when you look at the big picture:


In-fact if some fund managers would have just bought gold back in 2000 they would now be heroes as gold has out performed the markets by a very long shot for the past 10 years.

I do agree that there are times to invest in gold and times not to, taking Mr Worthington’s worst case example of investing at the very peak and then selling at the very bottom, that is human nature, to follow a trend like housing until it is well over bought (when there are funds of some kind available to do so). I do expect that to happen to gold again relative to other things but not to currencies that we have in circulation now, the currencies we have in circulation now I very much doubt will ever become a better investment than gold looking at the big picture as many will not even exist in future.

The fact is Gold has outperformed mutual funds and the big stock markets for many years, and there are real and systemic failures in global currencies burgeoning because of debt, and debt is the nature of money with no gold backing, that is to say money today is debt based not asset based, thus will fail under its own compounding interest rate in countries where current account deficits are continuous (Like New Zealand, UK and America)

Mr. Worthington says Gold pays no interest, correct that is because it does not need to, it is an asset not debt. If paper money did not pay interest why would anyone want it? After all its just paper (or computer digits)

In the 80’s when gold finally came down compared to dollars, it was a different time and there were very different actions taken to “fix” the economy in America. Back then the man in Ben Bernanke’s role was Paul Volcker instead of printing money like Ben is doing today Paul made big cut-backs to really try to put the books back in order in a logical way, he increased interest rates higher and higher, while Ben is holding them down near zero by buying US bonds with printed money! Paul brought back trust in dollars by limiting supply while Ben is destroying trust with unlimited supply. These are very different times and they really can’t be compared. People did over buy gold in the 80’s but it only started coming down compared to dollars when interest rates were up around 20%! Can you see that happening today with the global debt situation? Rates like that would collapse the whole system very quickly and would not bring trust back to paper dollars, it would have the opposite effect. This is a very different time, one need’s to look at the bigger picture, where there are major cracks appearing in the faith of paper dollars with unpayable debt and ever increasing citizen anger at cut-backs.

When looking at Gold as an investment I would urge to look at it as a way to preserve saving rather than making money, for example in a paper money collapse bread will skyrocket also, but you can’t put all your savings if you have a decent amount, into bread as it will go off, while gold is a store of value that is its purpose. Take Mr Worthington’s example of an 85% fall from peak to peak that he calls conservative, the fact is it was still worth something in 2001 and that is a lot more than nothing… like so many extinct currencies and stocks are.

Look at the big picture below, then inverse it when thinking about the value of paper money, that is the same thing, that is to say while there has been inflation of “things” compared to paper money there has been deflation of things compared to gold, therefore gold has performed very well as a store of excess effort (savings). It’s a good time to hold some gold because governments like US, UK and Japan are going mad printing money with no end in sight.

London gold fix 2000 to 2011

PS using the conservative RBNZ inflation calculator $850 USD gold at its peak in 1980 was about the same in NZD as the rate was about 1 to 1 and according to the RBNZ calculator that would be $3,800 NZD now. So gold is currently less than half of the peak price in 1980, but the situation with global debt problems is far far worse now than 1980. $3,800 is calculated using the questionable CPI (I call it “CPlie) numbers, compared to housing inflation over that same time gold would need to be $10,000 NZD per ounce (USD $7,400)! That goes to show just how over valued housing is.

By the way, Silver is the better buy in my opinion, gold is not cheap compared to other things in historical terms while silver is still cheap. Gold however compared to currencies is another matter, measuring gold value against a paper currency is like using a rubber band measuring tape.

I conclude that Mr Worthington’s article was very useful for wrapping up fish & chips, and like all paper has returned to its intrinsic value

Bye for now.

Now Goldmeasures.co.nz, please update bookmarks

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Dear readers and subscribers, GoldMeasures . com is no longer and has been replaced by .co.nz.

Someone got hold of my .com address even though I had the name locked and on auto-renew, when my credit card expiry date changed someone jumped in and grabbed my domain name, and too make matters worse it was used as some sort of spam site! (This spammer has been blocked now so the .com address does not even work at all, so it's just wasted.) Because I use a separate feed for my subscribers there has been no information lost or stolen etc... it's just a pain that's all.

However I have to take the blame,  complacency had set in, I should have been watching more closely.

Well there has been so much happening out there in the world and market place, you could not say we are living in boring times!

I've had my critics, but when I look back over previous posts have things changed?
I guess I have not posted as much as I used to because after my studies and realization about debt based money the outcome seem fairly well set, so I've just been "watching the show" as it were, but we have to be careful about complacency as the situation is serious, but I admit sometimes I do get a bit complacent, but after reading a bit of financial news it puts me back in my place, that is to take it seriously and be prepared.

I just reviewed some of my old posts to see if my opinions had changed much:




  • Broken Window Economics - May 2008 - An interesting read given the global "natural disasters" happening at home and abroad



  • The grand illusion - June 2008 - The temporary illusion of wealth that debt money can create.


  • The Silver Chair - March 2009 - Why to be wary of local council bonds, the problems have not started yet but I believe they will, you can see it happening in the USA now.



  • Famous last words - July 2009 - Alan Bollard reserve bank governor of New Zealand said on 14th July 09: "Early signs of global recovery have now emerged. We have avoided a repeat of the Great Depression," need I say more? well I did, in this article I have listed some very famous people saying similar things just after the great depression started.



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The situation is still the same, I have said it before and I'll say it again "You can't have debt mean nothing and Money mean something at the same time"

I guess a lot people out there know that, but a lot of people don't want to hear it right now, at some point it will become the unavoidable truth.

Bye for now

Capitalism with no capital?

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Free market capitalism has received a bit of a hard time lately with the unpopular bail outs of banks after “free market capitalism went crazy” with “unbridled greed”.

But what is free market capitalism and who are capitalists?  Well some might say “that’s an easy one: the Western countries are capitalist and the East is getting there.”

But looking at my 1982 Oxford Dictionary, the definition of capitalism is:

“System in which private capital and wealth is used in production and distribution of goods, dominance of private owners of capital and production for profit.”

A Capitalist then is:
“Person using or possessing capital, rich person, of capitalism or capitalists.”

Hmmm….. That sounds like the America, UK and New Zealand of old, not like it is now. 

Who in the world is building up capital for production and distribution of goods?
Well not the West, but even if the East has the “capital” part of free market capitalism I don’t think either the East or West has true free market capitalism now.

But what about Wall street, and what ever the street name is in New Zealand where all the banks, brokerages and hedge funds are…aren’t they capitalists?  No they are merchants of anti-capital, that is they sell debt.  It almost seems silly for me to state that, but this is the level of delusion we are in: In general debt for non goods producing un-distributable housing is not capital, it is anti-capital. Savings of excess labor used to purchase producing assets is capital!

The fact is debt has become the capital of the western world.  But is that right? Can it work?  Everything that is common sense and wisdom says that debt is the opposite from savings, debt is anti-savings that is just common sense.  Yet here we are with our entire monitory system based on debt now, like it was an asset!

My old Oxford Dictionary made capitalism easy to understand as I thought it would be,  but over time maybe we have lost our way, the definition is now not so certain and simple, the online up-to-date Wiki definition is actually similar but note the significant added bit at the end:

“Capitalism is an economic system where capital and land, the non-labor factors of production (also known as the means of production), are privately owned; labor, goods and resources are traded in markets; and profit, is distributed to the owners invested in technologies and industries. The pervasiveness of wage labor is another important feature of capitalism, which depends on non-labor income derived from property not intended for the owner's personal use. Also see rise of financial capitalism, which controls all other forms of capitalism.”

So now we have “financial capitalism the master of all other forms of capitalism”
I say hogwash to that… The bankers make their bets, the hedge funds hedge their debts, but at the end of the day a capitalist countries economy whose core is hollowed out with debt will eventually collapse inward, the fraud will be exposed.

Like the little boy who pointed out the emperor had no clothes, “look the capitalists have no capital at all”!

How can the borrower be the master of the lender? Tell me, can that be the new common sense? With down now the new up, red now the new black?

We know the countries doing the borrowing and the ones who are lending…. So really who are the capitalists?   Are there any free market capitalists?

I don’t think it was lack of regulation or too much freedom that caused the “recession”, debt based money was decreed and regulated into place by governments allowing the “unbridled greed” voters wanted in the first place. Money was no longer based on capital, but debt, it could be made with a few strokes of the qwerty key board…. Well how about that! Money was unbridled and it went wild! Who would have guessed!
Those who wrote the American constitution knew it, to name some.

If money had real worth and was limited, banks would not be so keen to lend it out for any old venture,  greed would be bridled with the fear of losing something real.

Debt based money regulated into place by non-free market governments is a source of much unbridled greed, and the opposite of free market capitalism.

But as you may have picked up already, I don’t blame governments for this, even government actions are cause and effect, for example when people say “The government should pay for this, or boost spending for that” while in ignorance not knowing the government does not have said money, we the people effectively requested out of short term greed long term debt based money taxes and control.

I’ll leave you with this little gem:
Say not, “Why were the former days better than these?” For it is not from wisdom that you ask this."
Ecclesiastes 7:10

Economies like animals…In a pit.

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Greenies want sustainable living, they say “don’t take more than the earth has to give” These days they don’t hang out in the back of VW’s instead they’re in parliaments back benches.

But why don’t we hear a chorus of main stream economists warning us “we can’t spend more than we earn, it’s not sustainable”

Maybe I’m too simplistic, after all, economies are complicated animals right? Unpredictable, with many moving parts and dependant operations who knows what they will do next?

However an animal in a pit might be unpredictable but it’s still in a pit, It may do all sorts of unpredictable crazy things while it starves to death, but it will still starve.

A states economy that is continuously in deficit is like an animal in a pit, the longer it is down there the weaker it becomes reducing chances of ever getting out.

Every year the balance of payments is negative, is another year in the hole, we don’t get to start afresh each season with a clean sheet, how many economists discuss the cumulative effect of 30 years digging our 160+ billion dollar pit:            (Click image to enlarge)             

                                
After 30+ years of digging ourselves into this hole, will we crawl out in just one or two years? (Yeah Right!) This graph was made by simply adding quarterly data that is publicly available, but I bet you have not seen it presented this way, click here to see how the Reserve Bank reports it in bar-graph format, like every year is a fresh start.

Some of you may ask, do deficits really add up like that, are your charts just manipulated data making things look bad, well as a sanity check the below statement is quoted from the December 09 press release from Statistics NZ:

“At 31 December 2009, New Zealand's net international debtor position was $167.5 billion (90.3 percent of GDP). A net international debtor position means that overseas investment in New Zealand is greater than New Zealand investment abroad.”

It’s real, it has not gone away, NZ has accumulated 167 Billion in debts with a population of 4 million people:

•    $42,000 for every man woman and child.
•    $128,000 for every full time employed person

Then if we were to consider only those who are not in Government jobs (i.e. not paid by tax from other working people) the debt per working person who can actually dig us out of this hole is overwhelming.

Truly without people taking this very seriously we will not get out of this pit, reality is it’s likely too late, it is so much work to get out from here, people welcome delusion, i.e. vote in politicians that say “everything will be OK just keep on digging, In fact since you consumers are now so weak we’ll do the digging for you”.

Maybe the main stream economists take comfort from all the company we have in the pit: The British lion, the American eagle, the PIIGS and host of others all looking at each other saying “it’s ok just keep on digging”, however that Icelandic clubbed seal is stinking up the place reminding us of our mortality.

Funds flee Greece as Germany warns of "fatal" eurozone crisis

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Funds flee Greece as Germany warns of "fatal" eurozone crisis
Quotes from the above article:
“Germany has triggered a near-panic flight from southern European debt markets by warning that there will be no EU bail-outs, even though it fears the region's economic crisis has turned dangerous and could prove "fatal" for the entire eurozone.”

“The yield on 10-year Greek bonds blasted upwards by over 40 basis points to 7.15pc in a day of wild trading. Spreads over German Bunds reached almost four percentage points, by far the highest since Greece joined the euro, and close to levels that risk a self-feeding spiral. Contagion hit Portuguese, Spanish, Irish, and Italian bonds.”

The above article brings a sense of realism to the fragility in global finances, do you feel a change in the air?  Confidence in the recovery seems to be vanishing, have the illusionists run out of tricks?  Exactly what are they up-to now:  Secret summit of top bankers.  Seems like there is a secret summit just about every weekend, and if they are really secret then why do we know about them?

Food for thought……

Speeking of food, there are a number official reports that would indicate this years global food harvest has been dismal, yet official numbers from the US show a bumper crop… so who do you believe?


Keep in mind the USA produces 30-40% of major global food crops.
See:  *****2010 Food Crisis for Dummies*****

Also:

Global deep freeze threatens 2010 food supply

Food Shortages Coming, Buy Commodities: Jim Rogers

"Strong risk" of 2010 famine in Africa's Sahel: EU


But why would people lie about such a thing?
Well I do believe many markets are manipulated by paper contracts of many forms.  In many cases the perpetrators can get away with it for years, but what about food?  Does it matter how many futures contracts you have for grain at a fixed price, if the food does not exist you will not get your food, you will not take further contracts as payment like one might do with money, you actually want the real thing, your hungry customers demand it.

Futures contracts can be very dangerous,  people get to rely on them like they really do represent something real, but at the end of the day they are just a promise to pay, if the payee has nothing to pay with then what?

Due to artificially low food prices which are enabled by futures contracts combined with questionable statistics, people are not adjusting their consumption based on supply & demand so when the truth comes out its too late, there’s little left for “a rainy day”.

It’s up to individuals to research and decide if this issue is real, but I thought it too important not to mention, I have to say reading through the above link that it is very convincing.

Let’s look at the world with our eyes open, how many have fallen in history by trusting in it. (The World)

To end with a happy quote:
“I am the bread of life; whoever comes to me shall not hunger, and whoever believes in me shall never thirst.” John 6:35

FAQ - Getting Started in Precious Metals

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Below are commonly asked questions I am addressing to start with,  please advise me if you have other questions you would like to see included. If you have any comments on the content I would be pleased to hear from you, this would help me to maintain a relevant and useful FAQ section.


Frequently asked questions:

What is the Standard weight & measures for precious metals?
What makes Gold & Silver suitable as money?   
Did the gold standard cause the great depression? 
What is Sterling Silver?
What are common bullion hallmarks (Brands), and does it matter?

The Emperor's New Clothes

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That’s the title of the famous short tale by Hans Christian Anderson, translated into over 100 different languages, well known and appreciated as the tale transcends different languages and cultures to the human condition, something everyone recognizes no matter where they are from.

I listened to this tale again just recently and it made me think about the current situation where very educated, professional and influential people are saying the recession is over, as a matter of fact they are laying future plans based on the recession being over, a similar condition exists around the world transcending culture and language, it’s that same human trait as described in the Hans Christian tale. 

The experts say the recession is over, who are we lowly people to disagree, certainly most people would like the recession to be over,  so if  “they” say so and provide snippets of statistics to show it, most people will be inclined to take their word for it but maybe in their hearts of hearts they know something is wrong.

The little boy at the end of the tale proclaimed "But he isn't wearing anything at all!" Suddenly those around realized that it really was that simple, he really just had no clothes on.  In our real life drama I’m saying the recession is not over, nothing has changed for the better and in-fact things are getting worse, and the truth is right in front of us, it’s that simple.

The below article describes how the New Zealand treasury are busy borrowing 250 Million dollars a week for our government, just to keep it running.  There are only 4 million people in New Zealand!  Yet the article tends to focus on how they raise the funds and how they must work hard to promote our bonds to do so, but not how crazy it is that we are borrowing like this in the first place!  See: Treasury office keeps NZ afloat

The recession is not over when governments replace “the people” as borrower, governments get their money from “the people” in the first place.  Will our government ever recover this money from tax payers without selling many major assets… I don’t thick so.

Even selling assets is more honest than what is going on in the US, I have suspected for some time that the major buyer of USD bonds has been the US itself! This would have been thought crazy only 1 year ago, yet they are doing it, and to a much higher level than  outlined in their “quantitative easing” program, this is Zimbabwe economics and it’s really happing. See this article for more detail (a must read I think)

Bottom line is New Zealand, UK and US are still spending more than they earn (now at an accelerated rate),  This extra borrowing is called “Stimulus”.  But how do you stimulate an economy that is dying of indebtedness with more debt! It’s not logical, it’s a lie that all should see clearly, its right out in the open, its simple, not complicated, you don’t need to be highly educated to understand this, you don’t need to be the top dog in the reserve bank to know this.  36+ years of spending more than we earn will not go away in 1 year… have we started to pay it back…No.   Have we at least stopped borrowing more…. No.

Lowering interest rates does make the burden more manageable, like transferring bricks from a back-pack to a wheel barrow, it’s easier to carry but the weight is still there and in-fact still growing bigger as more bricks are being added.  Commentators suggest that with the “recession over” interest rates will need to be pushed up to curb inflation,  the RBNZ likes to be imagined poised with their hand on the interest rate lever waiting for the first sign of recovery and inflation.   Reality is there is no way our economies can stand increasing interest rates, this would be like taking the bricks in the wheel barrow that have now increased in number and putting them back in the back-pack,  impossible to carry collapse will quickly follow.

Does debt really matter? Can’t “they” just print money and bail out businesses and even people?


Debt really does matter, if debt does not matter then neither does money, we cannot have it both ways.  Making debt not matter with bailouts, stimulus and self funding debt (printing money to buy bonds) is the path of hyper-inflation.  A path the US and UK are heading down, buying their own bonds means that debt obligations don’t matter, there is no limit to it, thus money changes from a limited token of exchange to a worthless piece of paper. Will NZ be following this example?

However I do think debt forgiveness is a good thing,  this is different to a bailout.  A bailout doubles the amount of money originally borrowed because the original amount is “out there” in the economy, the bailout amount is added making the pool of money bigger (Inflation).  

Shakespeare said “Neither borrower or lender be”
I think the lender must take responsibility along with the borrower.  However reality is our governments are not heading down this path, they are firmly on the bail and stimulate path, this is rapidly increasing the public burden and this will come back to bite.

“the borrower is servant to the lender” (Proverbs 22:7)

So who are the lenders to our government and population, what will they ask of our countries?

Debt is a task master, and like a servant indebted countries and people must ask their task masters first before they do anything, they are not free or flexible to changing situations.

It seems all too late to change the outcome now, the fireworks will come, ask yourself, are you prepared? 
Purging debt is a very good place to start.
(Matthew 6:24) (1 Corinthians 7:23)

 

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