1. Print Friendly
  2. Bio

Funny Money Ricochets Worldwide

Wednesday April 10, 2013 10:07

Depositors’ cash savings and pensions are merely dispensable assets to be used for rampant speculation in a frenzy of maximizing stupidity.

Now the global game of trade, bonds and currencies is tied in to one nasty knot; and a “Gordian Knot” at that. Currencies are the new tools of economic manipulation.

Before Euro-land and the Euro currency and before the rise of China as a dominant world player, and before the rise of the United Nations/International Monetary Fund cabal (USA concocted and manipulated), financial disconnection more often ruled the world Not anymore.

Global leaders like America, the U.K., Germany, and Japan, in general, ran their own economic business both foreign and domestic. They were strong trading nations sharing within that group, super-fast computers. Ironclad connectivity was not so much in abundance. These countries worked and traded together but in fact were distinctly apart on balance. Further, they respected currencies and valuations of the international bond and stock markets as major market participants for the most part.

Now the global game of trade, bonds and currencies is tied in one nasty knot; and you might add a “GordianKnot.”

“The Gordian Knot is a legend associated with Alexander the Great often used as a metaphor for an intractable problem (disentangling an ‘impossible knot’) solved easily by cheating or ‘thinking outside the box(cutting the Gordian knot).” –Wikipedia definition

Notice the “solved easily by cheating” or “thinking out the box” remark. This is what we have today as Japan openly strives to print currency and bonds ever faster, China’s Yuan rolls around at will and the USA has been originating smoke-and-mirrors cash and credit for years. Other nations have either jumped on the “print man’s wagon” or are about to in a frantic effort toward currency devaluation. This is a legendary race toward the old 1920’s Smoot-Hawley “beggar thy neighbor” trade policies designed to steal more export trade sales and avoid importation costs as much as possible. Make your money cheaper and more foreign people can afford to buy goods from you.

Using tools of tariffs and other import restrictions, new taxes, barter, exclusion of certain currencies from big trades and other nefarious methods of “solving things easily by cheating” or “thinking out the boxworks wonders.

Global finance has become increasingly disconnected from any reality. It reminds us of the new normal in Washington D.C. politics where the laser focus is total destruction of the opponent party rather than working together to solve America’s problems.

The American stock market is not the economy. The American economy is not the global economy. Yet, the amalgamation of all markets everywhere have become tangled into a single, giant, global, casino web of stocks, bonds, futures, and derivatives.

This is a central banker’s witches’ brew of financial disaster just waiting to self-destruct.

When something nasty happens in Cyprus for example, the fallout reverberates around the world. Tiny Cyprus is just a little island with a population of one million people. Yet because of huge foreign bank deposits in over leveraged banks (mostly Russian) it produced an explosion in credit and stock markets with unimaginable pushback in politics all over Europe. Little Cyprus was the international headline maker for one week. Before these events, most didn’t know it even existed or where it was located geographically.

It is the interconnectivity: the interlocked fundamentals of USA currency and bond markets propping the world that is the glue holding it all together. This is all that remains in a super fragile recipe in a financial dream of “Mark to Fantasy.”

The US dollar currency has slipped from being a dominating 85% world reserve currency to something like 67-70%, but it is a fact that the dollar is still king as complaints begin to grow as to its importance and value. Some suggest the US dollar will vanish but we say its value gets cut in half in a major weekend mark-down bank holiday when pensions are stolen by conversion to treasury bonds. When you have the power to print and make all the rules, it is game on.

Now things are beginning to fray badly out on the edges. Emerging economies of the BRICS; those being Brazil, Russia, India, China and South Africa are growing faster, on the fundamentals than those previously dominant nations of America, Japan and parts of old Europe. These regions have had some recent favor for stock trading in major world financial centers, as it is perceived there to be more growth in those national equities.

“The ‘BRICS (originally "BRIC" before the inclusion of South Africa in 2010) is the title of an association of emerging national economies: Brazil, Russia, India, China and South Africa. With the possible exception of Russia, the BRICS members are all developing or newly industrialized countries, but they are distinguished by their large, fast-growing economies and significant influence on regional and global affairs. As of 2013, the five BRICS countries represent almost 3 billion people, with a combined nominal GDP of US$14.9 trillion, and an estimated US$4 trillion in combined foreign reserves. Presently, South Africa holds the chair of the BRICS group.” –Wikipedia

We are now all in this together.

Our current economic and political atmosphere is one of alleged improvement as we pull slowly out of a “recession” signaled by the manufactured numbers from La La Land. This nonsense is promulgated by pandering politicians and central bankers and nation’s treasurers telling us the world has begun to slowly heal and repair itself and we have the worst behind us.

What these pundits and liars fail to acknowledge is that American housing collapsed as we did forecast in June 2005 when we noticed lumber futures did a cliff dive. And then, both new and used home sales began to wane as all was smothered with derivatives to the moon on Mr. Greenspan’s policies of free money from 2002-2006.

Then the banks went broke and everything went haywire in 2008 to the extent a USA $700 billion TARP taxpayer robbery was demanded to save broken insolvent global banks. Those were the very banks that produced all the toxic derivatives, bad mortgages, and specious loans that brought the world of finance to its knees. Those were the very banks owning shares in the Federal Reserve. Yes, the very Federal Reserve that prints and sells bonds and loans them to big banks!

Production of energy quit growing in 2005, housing hit the wall, derivatives got scary and the atomic credit explosion of 2008 blew apart the whole mess.

Now we are told it’s getting better, but the same actors are doing the same bad stuff all over again. How is this possible? They can enjoy a do-over as the authorities in charge are in cahoots and refuse to block the mess from happening again. The derivatives pile is larger than ever (they are trading $650 trillion a day in the City (London) and who knows how much in New York all over again in Act Two? There are simply no limits because there are no limits.

The new normal means you can steal depositors’ money if you need it and you can trade using savers’ cash with wild nutsy trades knowing you will not be held accountable. Rules are
for fools. Rules are for suckers. Rules are for the Sheeple as central bankers and politicians rise to a higher impervious plane of no rules and non-prosecution. Depositors’ funds are no longer sacrosanct, but merely a honeypot of cash, up for grabs in the largest robberies.

Depositors’ cash savings and pensions are merely dispensable assets to be used for rampant speculation in a frenzy of maximizing stupidity.

Big banks are filled with rotten assets as old toxic mortgages are still piled up in back rooms sitting in mortgage-land purgatory. These loans went bad and were either foreclosed upon or merely left in limbo with no attempts at collection. For those not in the know, limbo is located near bond purgatory.

Many mortgages are not being paid each month, as homeowners do not understand who to pay; who legitimately owns their loans. Huge billion dollar packages of mortgages were sold several times, then sliced and diced into derivatives and dumped on European investors in packages marked AAA or AA paper. Not only were they not top grade, but they were not even useful in an outhouse.

Waves of speculation have been underway since the 2008 debacle was papered-over (both literally and figuratively). These phantom assets are piled to the moon in a three-act play known as “extend and pretend”.  

Now, all three acts are nearly over and it is very close to the cycle time to endure a truly religious experience.

It is our contention, all markets can appear normal through at least the end of July 2013. As we move into August, traders and investors usually begin to research and discover chances for new positions, exits of old ones and make choices as to where they put money for the 4th quarter.

In our view, that is the cycle timing when the hedge fund operators and larger investors begin to understand that the entire fetid pile of stinky paper is destined for the landfill. Watch out for September 15 through October 15, 2013. That’s when we think a massive convergence of untoward events and a sincere understanding of this nastiness hits home.

In a run for the exits, the last one through the door is playing musical chairs and he does not get a chair for support but rather gets a lump of coal is his stocking from Santa three months early.

Physical gold and silver owners with handheld possession win big.

It is obvious to us that hard assets are the answer. It all starts with physical gold and silver.

Somebody please tell us when global bond markets crash for good and we’ll tell you when this can all get better and we start over again, maybe with a gold-backed currency.

By Roger Wiegand

Roger Wiegand is the writer of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and long-term traditional stock shares and futures and commodities trading with specifics for individual trades.

Roger also is a regular contributor to The Korelin Economics Report (www.kereport.com) the highest rated daily Internet radio program listened to throughout the world, dealing with politics and hard assets. He is also a regular guest on the Weekend Edition of The Korelin Economics Report, which airs on radio stations across the USA on Saturdays and Sundays.


Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

Precious Metal Charts

Click to see this Precious Metal chart
  1. 24h
  2. 30D
  3. 60D
  4. 6M
  5. 1Y

Interactive Chart