Depression Denial

Reading time: 1,776 words, 5 pages, 4 to 7 minutes.

Do you still think we are not in a Stealth Depression? Do you believe the ass media’s propaganda that things are getting better?

I’ve been commenting on this continuing financial, economic and social collapse for more that five years now so I’m going to do something different; I’m going to do what Rick Rule recently did on King World News. He asked the following questions [I’ve paraphrased somewhat]:

Is the financial crisis in the Western world over? Has anything been fixed?

Can you name any G20 country, just one, that has a balanced budget?

Do you think that the global banks are solvent? [We’ll discuss Canadian banks’ stealth bailouts in a future article.]

Do you think 6% or 7% equity is enough to run those big bank balance sheets?

Do they think marking bank assets to ‘myth’ rather than marking bank assets to market makes the banks’ assets solvent?

Are interest rates around the world still negative compared to inflation?

In view of recent Japanese actions, do you believe that competitive devaluation of Western world currencies, the yen, Canadian dollar, the US dollar, etc., is ongoing, or do you think that has stopped?

Do you believe that the European periphery, places like Italy, Spain, Portugal, Greece, Malta, Slovenia, and maybe even France, are still challenged, or do you believe those problems are over?

Do you believe that liquidity is a substitute for solvency? In other words, is central bank printing and liquidity in the system a substitute for the fact that the debts are very large relative to those countries ability to service that debt?

Do you believe that the US, Canada and other G-20 federal governments still have budget issues?

Do you believe that US states and Canadian provinces have significant budget issues particularly with regards to unfunded pension liabilities?

Do you believe that cities, towns and local municipalities have budget issues, also with regards to unfunded pension liabilities?

Do you believe the trillions of dollars of derivatives (worthless financial instruments) on bank and insurance company balance sheets still pose structural problems, both to the economy, and to those institutions?

Do you believe the momentum-driven institutional sellers of precious metals have enough money to overcome physical buyers of those precious metals?

Do you believe that the ascendant Asian and South Asian cultures still have an affinity to owning physical precious metals?

And, here’s a few of my own questions: Do you believe that Quantitative Easing (printing an unprecedented amount of money out of thin air) has healed global economies?

Do you believe an historically unprecedented length of time of Zero Interest Rates has healed global economies?

The authorities tell us if they hadn’t done all this, global economies would be in worse shape. Do you believe the very people who caused this mess with fiat currencies, corruption, cronyism and unprecedented debt levels know what they’re doing let alone able to prove that assertion?

Do you believe that the largest bubble in history – bonds, will not burst and destroy savings and pensions?

If you buy groceries and gas do you believe governments’ inflation statistics of less than2% when John Williams Shadow Stats shows it to be 9% in the U.S. (Canada 7%)?

Do you believe that U.S. unemployment is 7.5% when Shadow Stats shows it to be 23%?

With Canada and New Zealand proposing ‘bail-in’ legislation a week after Cyprus’ deposits were confiscated, don’t you think this last, desperate act was planned for a long time and Cyprus was just the litmus test for more to come?

Having exhausted all their ammunition except outright depositor confiscation (bail-ins), do you believe governments and central banks are in a position to fight the next recession which is already overdue, occurring as they do every 4 or 5 years?

2006 – the U.S. housing bubble peaked and began to burst

2007 – two of Bear Sterns’ hedge funds collapsed proving the worthlessness of more than a $1 quadrillion in global derivatives.

2008 – the Great Recession started in the U.S.

2009 – the Great Recession started in Canada and the U.S. supposedly recovered.

2010 – languishing economies cloaked by government propaganda, cooked statistics and ass media complicity.

2011 – languishing economies cloaked by government propaganda, cooked statistics and ass media complicity.

2012 – commodities peaking, a slowdown in mining and languishing economies cloaked by government propaganda, cooked statistics and ass media complicity.

2013 – poised on the brink of the next Greater Recession.

How many years are you going to watch this and deny we are in a Stealth Depression cloaked by government propaganda, cooked statistics and ass media complicity?

How long are you going to watch your buying power dwindle and your standard of living decline before you unplug from the matrix, buy real assets like gold & silver and prepare by stockpiling essentials?

I’m not going to tell you what to do. I’ve been telling you what to do for more than five years. You already know what to do. When are you going to start?

BUY GOLD & SILVER AS SOON AS POSSIBLE

Here’s another reason to hurry up and buy gold & silver that you haven’t been told about by the so-called economic experts. Professor Antal E. Fekete, in the Daily Bell article Gold Backwardation and the Collapse of the Tacoma Bridge says that gold & silver will go into ‘backwardation’

The price of a long term commodities future contract is normally higher than a short term contract (called Contango) given the increased risk of holding a long term contract. In backwardation it’s the opposite. Permanent backwardation means a market is so out of whack it no longer serves a useful purpose.

This will destroy the official price of gold and that, in turn, will destroy the availability of these monetary metals. In other words, there will come a time when you will no longer be able to buy gold and silver but you will still be able to trade or barter. Fekete says, “permanent backwardation would shut down the gold futures markets. Gold could no longer be purchased at any price. Gold would only be available through barter. World trade is facing an avalanche-like transformation flattening out monetary economy into barter economy. Practically all economists, financial writers and market analysts have missed this possible scenario.”

Gold & silver demonstrates the stupidity of central banksters and lamescream economists. Gold and silver are NOT ordinary commodities and they do NOT obey the ordinary laws of economics. For instance, if we look at the Law of Supply and Demand for a commodity such as wheat, a higher wheat price induces farmers to grow fewer carrots and more wheat. The resulting increased supply of wheat then pushes the price of wheat lower to achieve somewhat of an equilibrium. This does NOT happen with gold & silver. Higher gold & silver prices induces people to hang on to their gold & silver and actually reduce available supply.

Conversely, a fall in the price of gold & silver, instead of scaring people into dumping their gold & silver, induces them to get rid of worthless fiat currency and buy MORE gold & silver. This is what we see now. The price of gold & silver got hammered. This increased the demand for gold & silver so much that dealers are sold out and buyers need to wait weeks or months for dealers to get re-supplied.

It is a testament to the stupidity of Fed Chairman, Ben Bernanke, his merry band of stooge banksters and global central banks that they thought dropping the price of gold & silver would scare people out of gold & silver and into dollars. Instead, the opposite happened. As prices got cheaper, more people wanted to buy gold & silver.

In Gold & Silver Restrictions Coming, I warned you that governments will try to shut down many gold & silver dealers and force the remainder to disclose customer’s names and addresses for eventual confiscation. Now I’m warning you that even the remaining dealers will someday have no remaining gold & silver inventory for you to buy so buy it now while you can.

Will this make gold & silver obsolete? No, of course not. As I’ve said repeatedly, gold & silver are NOT investments; they are protection and insurance against the collapse of fiat currency. 2,600 years ago, one ounce of gold could buy 350 loaves of bread. In the future, one ounce of gold will buy the same thing regardless whether the price of bread is $1,000 a loaf with gold at $350,000 or 10¢ a loaf with gold at $35. Everything else will be priced accordingly. And, paper money will be nothing more than kindling and ass wipe.

Is it possible that gold & silver prices will fall further? Yes, it is possible. In fact it is quite likely. Does it matter? No, it doesn’t matter because the “price” is the official paper price. The official paper price is meaningless because no one will sell at a lower price. Dealers will simply say they are “out of stock”. At lower prices, mines will shut down and supply will vanish and gold & silver will start to rise again.

The only meaningful price is the price you pay for physical gold and silver and that price is already 10%, 20% or as much as 30% more than the so-called official price. The price you pay is the REAL price. And if you wait much longer, you won’t be able to buy at ANY price. Govern yourself accordingly.

TACOMA NARROWS BRIDGE COLLAPSE

Professor Fekete uses the the 1940 collapse of the Tacoma Narrows suspension bridge as a comparison to today’s global economies

Elementary forced resonance with sustained 42 mile per hour wind provided an external periodic frequency that matched the bridge’s natural structural frequency causing “Galloping Gertie” to shake itself apart. Engineers have since learned to accommodate bridges’ natural resonance so today’s bridges are safer.

The comparison to today’s economic condition is apt because we are seeing greater and greater volatility in more and more asset bubbles. Rising and falling interest rates make prices rise and fall in a runaway oscillation where the “wind energy” is provided by the ever-increasing idiotic central bank injections of excess credit and endless money printing that kicks the economic system to ever higher levels of volatility. Like the bridge, the economic collapse begins slowly with the closing of the “gold window” in 1971, picks up speed with increasing credit and debt. And then suddenly it collapses.

The mantra:
We cannot spend our way to prosperity.
We cannot borrow our way out of debt.
We cannot pretend our way out of trouble.

Stay tuned. It’ll get worse.

Gerold
May 13, 2013

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About gerold

I have a bit of financial experience having invested in stocks in the 1960s & 70s, commodities in the 80s & commercial real estate in the 90s (I sold in 2005.) I am appalled at our rapidly deteriorating global condition so I've written articles for family, friends & colleagues since 2007; warning them and doing my best to explain what's happening, what we can expect in the future and what you can do to prepare and mitigate the worst of the economic, social, political and nuclear fallout. As a public service in 2010 I decided to create a blog accessible to a larger number of people because I believe that knowledge not shared is wasted.
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5 Responses to Depression Denial

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  2. GBV says:

    “Conversely, a fall in the price of gold & silver, instead of scaring people into dumping their gold & silver, induces them to get rid of worthless fiat currency and buy MORE gold & silver.”

    I see a problem with this.
    As the deflation continues, fewer and fewer of us will have jobs & incomes to pay for said gold & silver. Thus prices can continue to fall, but people won’t necessarily rush in to try to catch a falling knife as they have done recently – in fact, they will be unable to if they do not have access to the incomes & cheap credit we’ve traditionally be accustom to.

    Note that when housing prices dropped in the US, “vulchers” swooped in and picked up discounted houses as well. I suspect both of these instances were only possible due to the fact the market is in bizzaro land thanks to all the cheap credit sloshing around the system. As credit tightens up, people will not be able to afford to rush out and buy these assets, let alone service their existing debts and continue to put food on the table.

    Also, if I remember correctly, gold/silver were already in backwardation when I first started buying about 2 years ago (http://silvergoldsilver.blogspot.ca/2011/08/gold-backwardation-has-arrived.html). So it’s probably important to point out that just because they enter into a state of backwardation does not mean they will remain in that state… and in this hyper-inflated economy we live in that is about to deflate (stealthily or otherwise), it’s a good bet that the price of gold/silver will fall and the “weak hands” (those who bought physical on margin / credit) will have to liquidate at distressed prices.

    “The official paper price is meaningless because no one will sell at a lower price.”

    You cannot eat gold. People absolutely will sell at lower prices – I guarantee it. Not because you are wrong about the REAL value of gold as an inflationary hedge, but because people are stupid/short-sighted and they will rush out and buy gold without having access to land, food, shelter, water, security, energy, etc. and are carrying obscene amounts of debt.

    Even I’m guilty of this to some degree – I own gold/silver (a small amount), but I have no land, only about a year’s supply of food, rented shelter that goes away when my job disappears, and while I have some pretty nifty water filters and guns there is the risk they could break / be stolen. Also, I’m dependent on cheap energy (again, which is only affordable until my job goes bye-bye), which is in my mind one of the biggest problems I face. On the plus side, at least I’m debt free.

    Were I to lose my income, without access to all those other necessities mentioned above, I’d absolutely have to sell my gold/silver at any price the market would accept just to keep on living. This is the reality most people in the middle-class and below face.

    There is also health and our own mortality.

    Even if you do everything right and have all the survival necessities mentioned above, you cannot stop time & aging. If a collapse does come, I’m pretty sure Canadians can kiss their free health care goodbye – and when faced with death or access to medical care, wouldn’t you consider trading your gold away at a discount / below what you paid for it? To avoid death, I think you (and most anyone) would and consider it a bargain.

    In addition to death, there is one other thing you can count on – taxes.
    The government may end up accepting land tax payments in gold, but I think it would be pretty hard to divide up your gold/silver into the exact amount of taxes owing. In those cases, a person would have to liquidate their gold/silver to raise the amount of dollars they require to keep the government Jackboots off their property (and necks), possibly (probably?) at a loss.

    Gold will likely buy 350 loaves of bread and paper money will be good for nothing more than wiping ones ass in the future – but that’s the future. There’s a time in the almost-present where you might want to have access to a lot of actual bread & ass-wipes (no, not toilet paper – but stock up on that too!) before you start acquiring gold.

    Cheers,
    -GBV

    • gerold says:

      Agreed, but don’t forget that gold & silver are not “buy and hold forever” strategies. They, like any money, are a means to an end, not an end in itself. Would you rather put your money in the bank where it’ll definitely lose its purchasing power and likely get confiscated by a desperate government, or would you rather put some (not all) of your assets into gold & silver and then use them as required?

      Again, I reiterate that gold & silver are secondary, not primary concerns. We have more immediate objectives like paying off debt, acquiring skills (on-going), stockpiling food, etc. Only when we have the basics taken care of should we even consider buying gold & silver.

      You say, “As the deflation continues, fewer and fewer of us will have jobs & incomes to pay for said gold & silver.” That’s true but that’ll be a race between deflation and the end of gold & silver availability. Isn’t that all the more reason to buy if you can while you can?

      Yes, there will always be frightened and short-sighted people who sell their precious metals (PM’s) before they really need to because the price drops just as there are a great many who buy into the stock market when it peaks and sell at the bottom but even so, PM dealers report that there are ten times as many people buying as selling. Which reminds me; I think it’s time to put out a stock bubble alert and suggest people stop buying stocks and get ready to sell.

      PM’s are more than an inflationary hedge. They are a hedge against an uncertain future. They’re money in your hand outside the government’s control. Governments can inflate or devalue but they have little impact on the buying power of gold & silver.

      In any case, my message is to those who are well along in meeting these basic needs to diversify some assets into gold & silver. Those who are in a position to do so need to realize their window of opportunity will close soon. Another reader reported that banks require your Social Insurance Number to buy gold. That’s extremely disturbing because we shouldn’t have to divulge our SIN to anyone other than the government. It’s disturbing because it means they can now track gold & silver purchasers. Why would they require a SIN unless the government’s aim is future PM confiscation?

      Everyone’s circumstances will differ so some will use their gold & silver to convert to cash in the short term or barter in the medium term while others may hold long enough for their heirs to inherit. Remember that Orlov used some of his silver to buy guns and ammo. Others will barter canned goods for silver. No two situations will be the same but having gold & silver provides more options than not having them. PM’s are not a one-size-fits-all nor are they intended to be the only thing you’ll need. Think of them as one more tool in your tool box. The more tools you have, the more options you have to deal with a very uncertain future.

      And, you’re right about the difficulty of making change from gold. Whether governments will ever accept gold remains to be seen. Remember, in history, gold has been for kings, silver for commerce and debt for slaves. This is why I favour silver over gold. It’s more versatile especially in a survival situation, less likely to be counterfeited than gold and, with a 60 to 1 ratio to gold, silver may even be profitable. Notice I say “may” as the future has much uncertainty. The only things you can count on are death, taxes and yourself. Don’t underestimate yourself. Ultimately, it’s all you have.

      – Gerold

  3. Fred says:

    Good piece Gerold. Just been through a “donkey dance” with Scotia Bank trying to by 1/10 ounce gold pieces. Found out they only had 6 ( that’s not a typo it’s six) on hand in Winnipeg, and you need a SIN card with you to make a purchase.

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