first majestic silver


November 2, 2006

On the CBS Sunday Morning show of October 28th, a segment dealt with the software which allows total reconstruction and alteration of any photo. The fellow being interviewed has had 40 Time covers, the most famous being the one where OJ Simpson had his complexion darkened to make him look more threatening. That alteration got Time into a lot of trouble. The Sunday Morning piece showed how a rather ordinary looking gal could be made into a beauty queen by making her neck longer, eyes larger, hair different color, mouth altered, etc. Wonderful computer stuff I suppose, which can make things better or worse than they are in real life. Backgrounds can be changed, as well as colors, sizes, shapes, and even numbers. A distortion of the truth, in other words. Marvelous, but untrue. It made me think about the statistics which come out of D.C. Marvelous but untrue.

Don't you think that considering the extremely perilous condition the U.S. economy finds itself in, that everything possible that can or could be done, is being done? Even if it means not telling the truth? Consider: America owes more than any nation on earth has ever owed, and if all the collective debts were placed in one basket, they still wouldn't equal the debts run up by the D.C. Gang. Still, China and a few others buy our debt. China now has one trillion dollars of U.S. debt in its portfolio, or in other words China now has one trillion US dollars. Not only that, but it is absorbing 20 billion more each month. What to do? What could China do with all those dollars?

Currently, China is re-building its infrastructure, building more factories, huge dams, roads, increasing its army size and capability, and in general improving its lot in the world. It started out with cheap wages, and developed into something a lot more. When China's cheap wages were discovered to be even cheaper than Japans', a lot of manufacturing moved to China, leaving Japan with a much higher standard of living than it had before, but leaving the manufacture of cheapies to China. The initial gee-gaws made in China were pretty bad, but they learned quickly, and even though they still can't make extremely accurate machine parts and other things, they can certainly make TV sets and related electronics.

When Japan figured out how to make excellent cars, women especially, found out that American cars weren't too good. Americans began buying Japanese cars which were being made in Japan. The manufacturers figured that since most of their output was leaving Japan for the US, they might as well build non-union factories in the US, far away from Detroit. So they did, and the American auto manufacturers with their expensive, sloppy union workers in Detroit, sank like the Titanic. The profits from US made Japanese cars still go back to Japan, but they hire American workers to build them. After much training to be sure, the cars meet the Japanese standards. Remember the old adage that no one should ever buy a Detroit car that was made on Monday? Hung over union workers, I assume. The Japanese still buy a little US debt and still have a lot of it, and I am sure they cashed a lot of it in to build their U.S. auto factories. Most TV sets are built in China now, not Japan, as they outgrew that. China then, has a trillion US dollars. Think about that for a minute.

If you had a trillion U.S. dollars, which were losing value each year, what would you do with them? Get the hell out I imagine, which is what people do when they buy gold and silver. China gets out too, but not nearly as fast as they are buying our debt. They need to keep buying so that they can sell their output to us in exchange for paper dollars, which they seem to have an abundance of currently. They are buying millions of tons of steel, cement, lumber, and every known building product, plus building new factories and skyscrapers as we have previously mentioned. What else could they do? Well, they could build factories in the U.S. or for that matter they could buy maybe Wyoming? They could buy thousands of U.S. farms, office buildings, railroads, or controlling stock in these, as examples. Japan bought Columbia Pictures, Firestone and Bridgestone Tires and U.S. factories with their dollars. China could buy all the Ford stock maybe, or lots of things, such as controlling the entries to the Panama Canal, which I understand they already have done.

A trillion decreasing value dollars, and more coming in, does present a problem, now, doesn't it? But not nearly as big a problem, as the D.C. Gang has, trying to keep the leaking economic ship of state afloat. Think about the problems the D.C. Gang is up against. They know that an economy which continually borrows dollars to keep itself afloat, is sure to come to a dismal end eventually, and there is no known way to stop that eventual end, and that is the truth. As an example, take a family with a lot of credit card reserves, a good credit rating, and payments of more than the family income. Let's say that the mortgage payments are $2,000, plus food, utilities, fuel, and other debts amount to a total of $3500 per month. The $3500 is the lowest possible figure at which the family can exist, and this is cutting all expenses to the lowest possible amount. No vacations, no movies, and no restaurants. Just the basics to survive at $3,500 per month. The total family income is but $3,000 per month, and no raises in sight. This is a $500 per month deficit, which is being made up with credit card advances. So far so good? Yes, except the ultimate end is obvious. More truth. As credit card reserves are used up, the payments increase, making the $3,500 per month cost go up as the credit card debts go up. As the months, and maybe even a year or two pass, the payments are up to $4,500 per month just to survive, and income stays the same. Bankruptcy is obviously the ultimate result. Families have options of course. They can sell their home, car, or valuables to exist a bit longer.

What can the D.C. gang do to survive? Not much really, except to keep on printing, as reminds me of the old saying "keep on truckin." "Keep on printin", is about it, other than doing as the Time Magazine cover computer artist does, and that is disguise the facts and make it all look good. In other words tell un-truths Why do that? Because if enough people can be fooled long enough, the period at which point there is no other alternative but collapse can be postponed.

The more debt the D.C. Gang sells, and they have to, because they take in a lot less than they spend, the more interest they are obligated to pay. This is the truth. Economizing in D.C. is an unknown word, so the spending will continue, and not only continue, but at an ever increasing clip. Welfare, earmarks, and war aren't cheap, and they always seem to grow. Income is static and expenses are increasing, just like the family. The family will run out of credit card reserves to stay afloat, but the D.C. Gang will just keep on printing and borrowing (selling debt to buyers), because they have no other alternative. They have to keep pumping out the untrue 'good news' that inflation is only 1%, the unemployment rate is microscopic, the budget is almost balanced, 'stay the course,' and a host of other crap, which is similar to the computer guy making O.J. Simpson look much darker than he is, or the plug ugly looking like Miss America. I don't buy it, and an increasing number of debt buyers don't either, so the process is grinding down to worthless currency, unpayable debts, and ultimate collapse. Truth, but a time indefinite. Why not? Russia collapsed, and they're still there. Lots of nations collapsed economically and they're still there, aren't they? Yup. But the holders of those nations' debts lost their investment. Will you be here and broke? A client wrote me after last week's column on Enron, telling me about a 68 year old friend of hers who retired as a teacher, and whose retirement fund was heavily invested in Enron. She believed the un-truths about Enron, and she does as much part time work as she can, because her retirement is kaput. One more reason to not trust anyone but yourself. Don't be dumb. Protect yourself, and you know how.


November 2, 2006

Don Stott has been a precious metals dealer since 1977, has written five books, hundreds of columns, and his web site is

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