Friday, May 14, 2010

Explosive Gold Catalyst II:

Gold is is set to boom.  Paper money is doomed to fail.  All of this is becoming obvious to the average person.  Debt-based problems won't be fixed with debt-based, false, profitable to insiders, devestating to everyone else "solutions".  The coming age of precious metals boom and devaluing global currencies is as predictable as the sunrise because among tens of thousands of examples of fiat currencies world-wide, they all eventually realize a zero value 100% of the time without any single exception.  Clarity amidst uncertainty is nice.  Many opportunities exist for those who understand generally what is going on here.  It is not rocket science to figure out what the future holds for paper money.  Cheers, Tate

This is a co-authored piece with Jim Rickards, Senior Managing Director for Market Intelligence and Board of Director at Omnis.

Eric King:

As gold continues to hit new highs, it is simply demonstrating a loss of confidence in paper and cementing its place as the supreme global currency. Various news organizations are trying to explain why gold is moving higher with a plethora of reasons, but in reality, the answer is simple: Gold is in a bull market.

I wrote about the joint IMF/SNB High-Level Conference which just took place in Switzerland in my piece on the 4th of May. That piece was entitled: Explosive Gold Catalyst. The meeting was scheduled for the 11th of May, and coincidentally, gold happened to break to new all-time highs on that day. In the concluding remarks, Dominique Strauss-Kahn, Managing Director of the International Monetary Fund, made the following statement: "Finally, in principle, a new global currency issued by a global central bank with robust governance and institutional features could provide a nominal anchor and risk-free asset for the system independent of national currencies. This global central bank could also serve as a lender of last resort."

This is all part of a move towards global governance, but in order to achieve that goal, you can bet there will be more instability and currency crises to get everyone on board. Dominique somberly admitted, "I fear we are still very far from that level of global collaboration."  Don't worry Dominique, because the very nature of secular bull markets, in this case a secular bull market in gold, guarantees a continued acceleration with the loss of confidence in fiat currencies which is surely still in front of us. 

One thing is certain: All of this points to a coming mania in the price of gold and gold shares. 


Jim Rickards:


The Euro-bailout and guarantee fund will fail.  There are several reasons for this.  The initial problem is that governments have borrowed too much and the debt burdens are non-sustainable.  How can you solve a debt problem with more debt? All that the program does is to substitute EU debt for the debt of Greece, Portugal, Spain and others.  You are replacing national debt with multilateral debt but it's all still debt.  And so-called money creation by the ECB is just another form of debt because Euros issued by the ECB are simply paper liabilities of the ECB itself, so-called "notes" so even the money is just debt.  Any possible repayment of the debt involves deep austerity, spending cuts, layoffs, higher taxes, reduced benefits and other actions which will definitely cause a depression in Europe and perhaps 25% unemployment throughout the Euro-zone.  

The alternative is to print money which will lead to hyperinflation and the collapse of the Euro. So there are no good outcomes.  The G20 and the IMF will try to reliquify the system and create new money through the issuance of SDR's.  At the same time, people will try to protect their wealth by buying gold.  So as paper currencies collapse, the money system will become a foot race between SDR's and gold.  Large hedge funds are completely unimpressed with the umbrella for the reasons noted above.  They are shorting the Euro and buying gold.  

There is one other flaw in the EU plan.  In 1992, when George Soros attacked the Bank of England, he did so by selling Sterling and buying dollars.  This forced the Bank of England to do the opposite which was to buy Sterling and sell dollars.  Since the Bank of England had a finite amount of dollars to sell, Soros knew he could beat them by buying more than they had.  However, he needed real money to do this and he was perhaps the only speculator in the world at that time with that much money.  Today you do not need money to destroy national finances, you can do this by the creation of synthetic short positions in Euros through the use of credit default swaps (CDS) and other derivative instruments.  Goldman Sachs are experts at this.  And they can create CDS in potentially infinite amounts since there is no regulation and no margin requirements.  In effect, Goldman could create a short position equal to ten times the amount of Euros in the guarantee fund.  Goldman can create synthetic short positions faster than the ECB can print money.  Therefore, the ECB's plan is doomed to fail because they cannot beat the speculators who can use CDS instead of real money.

James G. Rickards is a director of Omnis, Inc. and former general counsel of Long-Term Capital Management. Follow him at

To hear Jim Rickards interviewed on King World News today CLICK HERE.


To read part one Explosive Gold Catalyst CLICK HERE.

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