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| The Silver Valley Mining Journal
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Wallace, Idaho, 23 February 2006 – If
we can get through the end of next month without serious economic
havoc (say, the whole planet blowing up, or a full-tilt outbreak
of the bird flu pandemic in Arkansas) it might be safe to
dig a few of those rat-holed Maple Leafs, Morgan dollars and
Krugerrands out of that backyard coffee can and trade them
out for Fednotes at your local pawnbroker or coin-dealer.
But in the middle of a paradigm shift, things
move very rapidly, so don’t go reaching for the shovel
just yet. Barely had we begun digesting this United Arab Emirates
port deal and the terrible bombing of that mosque and near-certain
civil war in Iraq when Capitol Hill Blue’s Doug Thompson
yesterday unearthed a Secret Service account that Dick
Cheney was drunk as a skunk when he shot his lawyer-buddy
on that South Texas quail hunt weekend before last. Being
liquored-up when you’re handling a gun is never a good
idea, but when you’re hunting in that condition it’s
a felony in Texas. Doug’s stories usually
show up a week or two later in Time or Newsweek, officially
vetted by the MSM. Our faithful correspondent Fred
Reed grabbed a jug of cheap red wine(Padre Kino) and slunk
off to a corner in Mexico to try to make some sense of it
all. The wine didn’t help. He wonders if psilocybin
might level the playing-field of White House insanity, put
things in perspective.
Forget digesting or recovering from a day of
cheap red; we were beginning to stagger like a first-round
boxer after a right hook from Ali when word arrived from Chris
Laird that the Yen-carry
trade was about to unwind. Being unsophisticated silver
slugs from Wallace, Idaho, we didn’t know there was
such a thing as a Yen-carry trade, but it’s been working
like this. The Bank of Japan has been charging zero interest
on loans for the past 10 years to try to revive the economy.
So guys were going to Japan, borrowing Yen for no interest,
converting those Yen to dollars, and lending them to us by
buying U.S. Treasury notes paying 3 percent interest, or wholesale
home mortgages paying a little more. Nice mark-up, if you
can get it. Except that the party is about to end, because
three quarters of economic growth in Japan will cause its
central bank to start raising the borrowing rate.
Writes Laird: “The BOJ literally acts
like a central bank of the world through the Yen carry trade,
supplying liquidity that finds its way into markets everywhere.
The phenomena is a decade old now for the latest manifestation.
The last time this level of penetration of the Yen carry trade
was reached was just prior to the LTCM collapse. Back then,
when the Yen unexpectedly strengthened 20% it caused a massive
move out of Borrowed Yen on the Cheap, and caused massive
market sell offs world wide, and was a direct cause of the
LTCM collapse, where the US FED had to act immediately to
bail out banks and illiquid brokerages and financial entities
with blank checks to forestall that crisis.”
We started to run from all this chaos like Fed
governors abandoning a sinking ship – the second one
to do so recently, with 8 years still left in his term, Roger
Ferguson, bailed
this week – when Libertarian
Paul Gallagher and a European think tank, LEAP
E2020, simultaneously and without having chatted with
each other first, warned of economic calamity within the next
bloody month or two.
March, the Europeans noted, is going to be one
nasty month. LEAP E2020 “now estimates to over 80 percent
the probability that the week of March 20-26, 2006 will be
the beginning of the most significant political crisis the
world has known since the Fall of the Iron Curtain in 1989,
together with an economic and financial crisis of a scope
comparable with that of 1929.” Why? Because the Iran
Oil Bourse will open on the 20th, and the U.S. Fed three days
later will quit reporting the M-3 figures, which most accurately
reflect the actual amount of dollars floating around there
at any given moment. Toss in an “intervention”
by the Bush-Blair axis or by Israelis in the Iran nuke mess
and the think tank’s estimate of calamity goes to 100
percent.
Hot damn! Meantime, the dollar-denominated
of that coffee can out in the back yard slides along sides,
“correcting” from recent “highs.”
As David
Morgan noted back on 12th December, these “highs,”
in terms of 1980 Fednotes, are still half-priced. And if all
the foregoing is too weird to sort out even with the help
of Dago Red or psychedelic mushrooms, maybe it’s time
to dig another hole, and fill up another can with metal and
silver stock. There could be as little as four weeks left.
By David Bond, Editor
The Silver Valley Mining
Journal
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