first majestic silver

300 Million Versus 7 Billion

June 14, 2014

Throughout history, dozens of nations have briefly held the mantle of global superpower. Until the 20th century when international travel, trade, warfare and information dissemination was less efficient; such power was typically exerted regionally and far more loosely. However it is now possible to wield influence far more broadly; and no one has done more so than the U.S., principally due to the awesome power of its “reserve currency.”

Unfortunately, America has not only succumbed to the inexorable competitive forces of 190 other nations, but badly misused its power. And thus, just six decades after peaking in global influence, economic might, and wealth it has been reduced to a fascist, socialist, bankrupt shell of its past glory intent on the fighting the world in every imaginable aspect.

When the dollar peaked at the turn of the century, the beginning of the end of U.S. hegemony was upon us; and just 14 years later, it’s “war on the world” has reached a fever pitch. It’s only a matter of time before America’s 300 million citizens – or more specifically the “1%” that make the decisions – lose the war they initiated with the other seven billion; and when it does, its unnaturally high standard of living will fall back to the median – yielding collapsing confidence in the dollar and a mad rush to alternative stores of value like PHYSICAL gold and silver.

Zero Hedge

It must be some kind of “cosmic karma” that the global economy peaked nearly the instant the millennia turned over. Irrespective, that’s exactly what happened. In our view, the three events that sealed the world’s cumulative economic doom were the 1999 repeal of the Glass-Steagall Act, the 2000 bursting of the tech bubble and the 2001 terrorist attacks. However, in the big picture, the principal culprit was debt saturation finally catching up to a world that abandoned real money three decades earlier. In other words, the world’s credit line “maxed out”; and thus, the resulting “diminishing returns” of incremental debt arrived with a vengeance.

As the self-proclaimed economic and military “leader,” America took it upon itself to address these events unilaterally to disastrous effect. To wit, the historic banking deregulation of 1999 was entirely ignored – yielding exponential growth of subprime lending, over-the-counter derivatives, and high frequency trading among other illegal and/or amoral activities; whilst the 2000 crash was “addressed” with unprecedented money printing; and the 9/11 attacks with one of the most irresponsible military strategies imaginable.

Today the dollar’s purchasing power is 30% lower relative to other currencies and far more so against items of real value – like food, energy, and precious metals (price suppression notwithstanding). Moreover, Wall Street not only is dramatically more powerful, but exponentially more corrupt and ingrained in the Washington power base. As for the post-9/11 strategy, it has arguably been a bigger failure than Vietnam and far more destructive in terms of impact on the nation’s finances and international standing.

Regarding Iraq, it was eleven years ago when the U.S. destabilized the Middle East based on flawed intelligence that not only was Saddam Hussein responsible for 9/11, but held “weapons of mass destruction” that were ready, willing and able to destroy America and its allies. George Bush declared “mission accomplished” in May 2003, but little did he know that the war was just starting; and now, barely two years after the last U.S. troops were withdrawn the situation is about to go full-out FUBAR. The ill-fated foray into Iraq, in which 7,000 U.S. troops were killed and 500,000 Iraqi civilians are incalculable; not to mention, the permanent increase in global energy costs and the national debt. And thus, this week’s news that “al Qaeda” is mounting a major offensive to take over Iraq could well prove a “death blow” to the global economy and with it American hegemony.

On Tuesday, the “al Qaeda spinoff” ISIS captured Mosul, Iraq’s second largest city – and with it, a refinery processing 310,000 barrels per day of oil or nearly a half percent of global production. Yesterday the city of Tikrit was overrun and ISIS today vowed to take over Baghdad. Already the Iraqi government has given America permission to attack such “insurgents”; and fear not they most certainly will. Thus at a time when gasoline prices are already at their highest level in three years – amidst a rapidly expanding recession – the odds of potentially catastrophic price surges ominously loom.

Crude oil prices are just 4% from last summer’s highs – when an attack on Syria appeared imminent; only this time, the odds of military intervention are far higher. And thus, the odds of the mythical “recovery” actually occurring – even in the world’s propaganda capital – may shortly turn negative just like European interest rates. As it is “the weather” is becoming a more and more an excuse with each passing day; and after today’s abysmal retail sales report of unchanged May results following an April decline, the potential impact of spiking energy prices – worldwide – could be catastrophic. With each passing day, the global economic outlook deteriorates further with the World Bank reducing its worldwide 2014 GDP estimate yesterday by 13%, and JP Morgan sharply cutting its final 1Q GDP forecast for the U.S. to negative 1.6%. As always, TPTB got it wrong while “shadow worlders” like the Miles Franklin Blog were dead on. And we ask, how long will they be able to hold together the “greatest (manipulated) disconnect of all time?”

Zero Hedge

The ECB’s draconian acts of desperation speak volumes of the true state of the global economy – as does yet another fantastic synopsis by the great Michael Snyder. Not to mention, Obama’s approval rating hit a new all-time low this week; and new secession movements, such as the one gaining momentum with 16 wealthy California counties are emerging in rapid succession. Such trends are not regional, but global in nature (see Catalonia, Spain, Venice, Italy, Scotland, and the UK); and ultimately are destined to destabilize multiple regions in the coming years.

More importantly the “secession” of real money believers from the fraudulent fiat Ponzi regime is a fait accompli; likely starting with the Swiss, when “direct democracy” eventually enables them to mandate the Swiss Franc from not only being de-pegged from the dying Euro but re-backed by gold. Of course, the “petro-Yuan” movement is gaining irreversible momentum with each passing day; and one day, last month’s “Holy Grail” Sino-Russian trade agreement may be cited as a major inflection point in the war against U.S. hegemony – not to mention, the gold Cartel itself. The series of revelations regarding the fraudulence of financial markets themselves; such as yesterday’s admission by the CEO of the London Metal Exchange that the archaic gold fix is “open to manipulation.”

Because the dollar-anchored fiat regime is a prototypical Ponzi scheme, the Fed will continue printing currency with reckless abandon forcing all other Central banks to do the same as the “final currency war” enters its final terminal stage. Horrific Western demographics will only accelerate the process until ultimately, the inevitable end game of hyperinflation arrives; first, in the “emerging markets” most vulnerable to Fed-exported inflation – and eventually, in the U.S. itself.

As for the aforementioned statement that gold trading is “open to manipulation,” how about yesterday’s prototypical action? In my 12 years in this sector, even I have never seen such blatant, 24/7 suppression such as the DLITG or “Don’t Let it Turn Green” algorithms that seem to appear every day now – atop the typical PAPER raids at “key attack times” like 2:15 AM EST (90% of all trading days over the past year), 8:20 AM EST, 10:00 AM EST, and the 12:00 PM EST “cap of last resort.”

Simultaneously, the PPT supports the “Dow Jones Propaganda Average” with limitless buying via freshly printed funds – in yesterday’s case, holding the line on a rare down day at “PPT ultimate limit down level #2”; i.e. 100 points. Simultaneously the Fed controls interest rates with an iron fist – lately, in exactly the manner we described in 2.6% Nuff Said! That is, they are so terrified of widespread understanding of the “most damning proof yet of QE failure” being exposed – i.e., plunging interest rates despite a so-called “recovery” – that they are actually defending 2.6% on the downside with the same veracity they spent the last year defending 3.0% on the upside.

In fact, it’s been comical watching the Fed pull the oldest trick in its propaganda playbook in recent weeks – in the 100% opposite manner as in the past. That is for the last year, it would announce a “better than expected” treasury auction every time rates threatened to surge – even though such “success” is meaningless due to the Fed “QEing” every auction. However, as was the case both yesterday and last week, they reported unexpectedly “worse than expected” treasury auctions just as the benchmark 10-year yield threatened to breach 2.6% to the downside in an effort to push rates away from the 2.6% “line in the sand.” To wit, there’s a 30-year treasury auction at 1:00 PM EST today; and with rates again threatening to fall below 2.6% – following this morning’s punk retail sales report – I’d bet anything that it too will be “worse than expected.”

Well that’s enough for today, as PM prices are attempting to surge higher (LOL, up exactly 1.0%); as not only Iraq, but the Ukrainian crisis takes an ugly turn for the worse – while the Cartel digs in with both heels.

Unfortunately for TPTB, the “trenches” they fight from are not fortified enough to stave off the onslaught of reality – in the Cartel’s case, as physical supply and demand dramatically tighten; and in America’s case, as the interests of seven billion people contradict its measly population of 300 million. Which side do you think will win? And knowing that how will you fortify your portfolio?


Andrew ("Andy") Hoffman, CFA joined Miles Franklin, one of America's oldest, largest bullion dealers, as Media Director in October 2011. For a decade, he was a US-based buy-side and sell-side analyst, most notably as an II-ranked oil service analyst at Salomon Smith Barney from 1999 through 2005. Since 2002, his focus has been entirely on precious metals, and since 2006 has written free missives regarding gold, silver and macroeconomics. Prior to joining the company he spent five years working as an investor relations officer or consultant to numerous junior mining companies.

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