Monday, September 26, 2011

Unprecendented Turmoil Ahead; Hold Gold

These are unprecedented times. The financial turmoil, now in progress, will be significant historically. It is by far uncertain how all this will pan out, but what is certain is that the measures now taken by the financial leaders of the world will change the way we do business in the future.

It started with the housing bubble bursting in 2007 and is progressing to the point where unlimited money printing will see this system collapse. The mountain of debt needs to be dealt with, not built upon

Is the doom and gloom and talk of change an overreaction? Remember, just last week, the major central banks promised unlimited cash to plug solvency gaps in top euro banks and to pay for debt maturing in troubled euro nations. Mr Trichet repeated, this weekend, that the ECB stands ready to provide banks in the euro area with unlimited liquidity, and stressed the central bank has ample means to do so.
"The ECB is supplying roughly EUR550 billion of liquidity to banks, which compares to EUR1.8 trillion of collateral it has on its books, he said. Trichet added the ECB can mobilize up to EUR4 trillion to EUR5 trillion of additional collateral with banks."
Yesterday, the meeting of finance ministers and central bankers in Washington decided to band together and promise £1.75 trillion deal to save the euro. Yes, save the euro and their banking cronies and abandon the rest of us to being the new middle-class poor. I cannot stress enough, that inflating the money supply will devalue all the paper money you think you hold. It's an economic and universal law. The more money you supply then the less value it has.

This from the Seeking Alpha on Saturday:
"Conditions in Europe continue to deteriorate as now 8 Greek banks have been downgraded by Moody's to basically junk.  So not only is the sovereign nation of Greece have junk bonds yielding over 70% per annum but also their individual banks.  The problem of course is very simple, the ECB must cover all citizens bank deposits to prevent a complete collapse in Greece.  Greece has over 10 million citizens"
Translated: Greece has no money. The banks cannot get funding. Remember the basics of fractional reserve banking; those funds deposited by hard working people weren't there before this crisis. People will soon discover the truth of this. Greeks, and other people in Europe, will want their money out this week. It won't be there, banks may close. This is what frightens the banking elite. They want an orderly default of Greece and order in the world markets. Good luck with that. Cat's out of the bag.

So what of the large down moves in gold and silver on Thursday and Friday? Here's a view from Art Cashin:
"Yesterday, the textbook was thrown out the window. All asset classes saw sudden and sharp moves far in excess of normal volatility patterns. To an old timer, that points to one conclusion. Liquidation. Wide-spread liquidation across asset classes. Currencies, bonds, commodities and stocks all moved swiftly and sharply in a direction that screamed - Seek safety! Raise cash! Get liquid...

All of that had a quick and discernible negative impact on markets. But, the selling was far more pervasive and dramatic than simply a conscious adjustment of positions based upon new data. Thursday’s action screamed liquidation - and not all of it voluntary."
So should we be selling gold and silver now before it's too late? That really isn't the question. If you are long gold and silver and not into trading, then fundamentals haven't changed. These are violent and volatile times. The Golden Truth blog has this to say:
"If you merely only held your gold/silver from their peak prices in 2008 until now/today, you would have achieved a 66% increase in your real wealth in gold ($1020 to $1700) and a 57% increase in silver ($21 to $33).  Got any other part of your portfolio that has performed like that?  No way.  So, are you top-ticking the market it you buy some more today?  I don't know short term.  But I would be willing to bet that a year from now that gold and silver will be much higher than where they are today.  Hold tight and be right."
The last 40 years has seen an incredible shift from producing things which are meaningful and useful, to a process of shifting large amounts of paper around in order to create phoney wealth.

Well, the tide is about to go out, then we will see who is swimming naked.

Gold in New Zealand dollars: $2136.67 per oz
Previous all time high: $2284.16 per oz (19 Aug, 2011)

Silver in New Zealand dollars: $39.88 per oz
Previous all time high: $59.19
per oz (30 Apr, 2011)
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The Anglo-Far East Company
The Original Private Gold and Silver Bullion Custodian
Your reference: an-001
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