The reverend Martin Luther King once said, “The arc of history is long but it bends towards justice.” I believe that is correct, but only if this is true as well: The arc of the universe is long, but it bends towards consciousness.
It has been my goal for the last 5 years to assist in that bend, with a focus towards financial consciousness and awareness. However, even after writing over 100 articles and speaking to thousands of good folks in that time I have come to doubt my effectiveness and impact on the lives of my fellow citizens. I fault myself for being too cautious and measured in my approach, in the hope and trust that the hard evidence will guide and compel by force of logic and probability.
But I am wrong to take that approach now.
There is smoke and fire all about us, and yet no one is really listening or paying attention to the cacophony of warnings sounding regularly and loudly as the system shouts itself hoarse trying to achieve our awareness.
A great zombie slumber has firmly taken hold.
The stresses that have piled upon the US/World financial systems in the last 4 years are truly staggering and cannot be sustained in any kind of reality-based analysis or expectation. This is our cornerstone fact: All roads lead back to the banking system, just as they did in 2008. And this world banking system is saturated to the hilt with debt exposure and highly leveraged speculative derivatives – by the trillions, which cannot possibly be maintenanced or sustained in any rational calculus.
And for you, gentle reader, the truth is the entire financial system on which we depend is not only fundamentally and intrinsically broken, but it is depraved and criminal by culture and intent. I am so sorry to say this, but this is a hard fact and is thoroughly and demonstrably true. Continually and repeatedly we have watched as central and important players are revealed to be engaging in systemic and international corruption in an all-out gamesmanship against you and your fair interests and participation.
Let’s take a look now at the newest and latest burning red flag, warning us all once again as to the true nature of the reality we are living in. And then let us consider a stunning new development in the ongoing remonetization of gold and how the traditional safe harbor it provides, for all participants, has taken on even broader and deeper dimensions:
The ballooning LIBOR interest rate manipulation scandal (NOTE: this is a key and vital benchmark bank interest rate used as a base and reference point to set a myriad of other monetary rates across many platforms) at Barclays bank, is estimated to be the biggest and most profound international interest rigging conspiracy of all time involving 16 of the world’s largest banks. Coupled with stock market instability, this newest criminal reveal is likely to fuel fresh doubts – as it surely must – about the integrity of the stock market and the larger financial markets as well. “Every time people begin to gain a little confidence, something else comes up,” said Randy Frederick, managing director of active trading and derivatives at Charles Schwab. “If it’s not Europe, it’s trouble IPOs, or JPMorgan or Barclays. Something new blows up and people say, ‘I knew it was rigged.’”
Frederick said the string of banking scandals and market instability has led some investors to pull their money out of the markets entirely, contributing to the long-term decline in trading volume. Frederick predicted options trading volume will be down 5 percent to 10 percent for the year.
A string of Wall Street crises, including the 2008 stock market crash, the collapse of the mortgage market, the botched Facebook IPO and the scandals at JPMorgan Chase and Barclays have meant “some very heavy body blows experienced by the public,” Richard Grasso, former chairman of the New York Stock Exchange, told CNBC’s Maria Bartiromo on Tuesday. “It’s been a real tough time for consumers who want to get back into the market.”
Grasso’s comments followed remarks last week by Securities and Exchange Commission Chairman Mary Schapiro that investors have a “concern about the integrity of the marketplace.” Schapiro told a congressional subcommittee that U.S. markets are threatened with “an unwillingness [on the part of investors] to ever engage in the markets again.”
Investors are unsure “whether they’re getting accurate and honest information” from companies looking to sell stock to the public and uncertain “whether the market structure itself is tilted against the individual investor and in favor of the institutional investor,” Schapiro said.
“There are some people out there feeling like the game is rigged,” said Frederick. “There have been enough events to make them suspicious. I think that’s unfortunate, but also accurate. And the industry needs to continue to make efforts to correct these problems and allay these concerns.”
This is gentle and polite analyses from key establishment figures. Let’s use plain language to say out loud the obvious : The markets are gamed and rigged against the average market participant and the banks running the show are pulling down the entire financial system. This is a matter of systemic and collaborative culture and not the result of a few bad apples.
The bottom line take-away from this reporting is this: The stability/fragility of our markets (and the dollar for that matter) is based on our mutual confidence – and it is only our interdependent confidence in the system, and our belief in an inherently stable and continuous Status Quo, that keeps our financial system moving forward. But confidence has a way of slowly eroding away, and then collapsing suddenly and without apparent and unambiguous forewarning. It is our sensitivity and intelligent awareness to this fact that allows us to prudently safeguard our position by taking a wise footprint outside this stressed and fragile system when appropriate. Such a time is upon us.
The warnings, moreover, are coming in serious multitudes and I expect some kind of Confidence Event at any point moving forward – especially in the coming August – October 2012 time period. Historically, the Fall is the most vulnerable period of time (1929, 1987, 2008 to mention a few). And while it is true that most people are looking for any kind of confirmation that the status quo is stable, and will only act out of necessity (with necessity only generated by crisis), it is the wise and prudent observer who takes action before confidence shatters and wealth is greatly diminished and/or destroyed. One only has to remember our most recent past, 2008, to be reminded of the truth and reality of that observation.
I am giving this warning to you to get out now. Take a footprint outside of the paper equity system now, at least partially and prudently. Take your cash value out and have it on hand – do not expose your wealth to this total storm of risk and explosive failure. Safeguard your value – seek safety.
Timing and positioning will always be your best tools.
Please give this next section a close read:
Gold has been called many things over the past several years. The shiny yellow metal is seen as a safe-haven to some, but a barbaric lifeless asset by others. In short, gold has trouble receiving a wide range of support as a key player in the global financial system.
John Butler, chief investment officer at Amphora Commodities Alpha Fund in London, explains, “A key reason why gold has not been acting like a safe-haven asset in recent months is because banks are so capital impaired that they are scrambling to reduce their holdings of risky assets in favor of so-called ‘zero-risk-weighted’ assets, against which they needn’t set aside any regulatory capital. As it stands, gold has a 50 percent risk-weighting. But some government bonds, including US Treasuries, German Bunds and British gilts, are zero-risk-weighted.”
However, new developments may slowly change how investors and institutions view the precious metal. Earlier this month, U.S. federal bank regulators issued a proposed rule-making note regarding capital risk-weightings for various assets. The Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency and the Federal Reserve asked for comments on a move that would place a “zero-risk-weight” rating on gold bullion held in banking organization’s own vaults, or held in another depository institution’s vaults on an allocated basis.
The move will essentially place gold on the same risk level as cold hard cash, zero percent. Historically, gold has received a risk weighting of 50 percent. If the proposal stands, it appears that banks will have more flexibility and will not be punished for holding gold as a safe-haven, instead of government bonds or fiat currency. This will likely help gold be seen more as a true safe-haven in financial markets and further drive gold bullion demand, which is already at historic highs among central banks.
While I do not expect the proposal to make gold prices skyrocket overnight if approved (and if unopposed goes into effect January, 2013), as gold bullion positions will be hedged, it does aid the recognition that gold is an important financial asset that lacks counterparty and downgrade risk, making it the ideal safe-haven. Some of the world’s largest and most powerful organizations have already realized this. The Bank for International Settlements, which is basically an international central bank looking over other central banks, recently released its latest annual report. It showed that the BIS reported a profit of Special Drawing Rights 758.9 million. However, about 15 percent of that profit came from the sale of physical gold and the repayment of gold loans. Apparently, gold is not as lifeless as some may think.
Bottom Line Price Call: By 2017, which I and others feel will be the peak of a Monetary Confidence Crisis, the general educated consensus predicts $7000 – $10,000 an ounce for gold. Silver has been trading in 50/1 ration to gold over the last few years, give or take, therefore we should see a $140 – $200 per silver ounce as well.
Crazy? Outrageous? You are already living in an era of incredible-as-the-new-normal. These pricings are totally and 100% consistent with the most cautious of actuarial analysis, current rampaging trends, and historical precedent.
This opportunity is the very crux of market and asset timing. Safety and leverage are yours for the taking, and you only have to stop listening to the chattering zombie class for a moment to realize that you are aware of the truth on an intuitive gut level already.
This is the time for me to go on the record, in plain language, and be a reference point for you as events further transpire in the coming months and year ahead.
So there it is, for the record – this is how I see it:
Serving strong financial coffee to sleepy zombies everywhere.