A Foundation of Quick Sand

by Scott Causey, Resource Correspondent

Every person on earth starts off with a base level of knowledge and inherent biases when being introduced to new skillsets. The inate skills, abilities, knowledge, and biases within that organism will determine a starting point for obtaining actionable new skills, or knowledge base.

How critical is it then for the starting point of not only the base that individual comes to the table with, but also for any subsequent training and education to be of the highest caliber available?

The answer is self evident. Start with garbage in and you’ll end up with garbage out. As the vast majority of people are most comfortable being “worker bee’s”, so then any organization’s succes ultimately depends on the tools and skills afforded to prospective and existing employees.

Now take everything about that mindset and throw it out the window for a moment. Your knowledge base is mired within quicksand created by the greatest propaganda machine the world has ever known.

Your democracy is a lie.

Your financial institutions are a lie.

Your insurance companies are a lie.

Your currency system is a lie.

Your interest rates are a lie.

To be blunt about it, if there is a number tied to “markets” these days that you see on a mainstream financial news outlet they are outright, boldface lies. The fancy term for this is financial repression.

Why do you suppose traders for JP Morgan and Goldman Sachs are able to make money no matter what happens in the world? Think there might be any chance they have access to more actionable information than the every man?

John Williams has been a private consulting economist for 30 years. He has worked for Fortune 500 companies, consulted with the U.S. Government, and has made a living by giving real businesses real economic numbers to forecast the trends of the real economy.

His work has been featured on the front pages of the New York Times and Investor’s Business Daily. Since 2004 he has run a website ShadowStats, which I cannot recommend highly enough.

Mr. Williams has a huge following in the online world of alternative media outlets and for good reason. I don’t feel like it’s much of a stretch that you would get more accurate reporting of an inflation number from an independent expert with three decades of experience tearing apart government numbers than from Uncle Sam who would like you to believe food and fuel costs shouldn’t factor into inflation numbers.

A quick comparison of the November data between Uncle Sam and Mr. Williams is very telling. Uncle Sam’s data showed inflation for November at 2.16%. Mr. Williams data showed inflation at 9.82%. Unemployment was 7.9% versus 22.9%. GDP was +2.49% versus -2.10%.

Now if Wall Street and the public at large were working off the latter numbers and not the former where would the stock and bond markets be? It’s pretty funny to contemplate for a moment discrepancies that large and it helps to give you a new frame of reference for just how skewed government data has become over the years.

At the height of the Great depression the unemployment rate was around 23% depending on your data source. In other words the “recovery” has no clothes. It’s a fairy tale. Kind of like AIG insurance on derivative products.

This week the King of investment banks, Goldman Sachs, declared the Gold bull market to be over. The ultimate contrarian signal. Accidentally released internal memo’s have shown that Goldman’s employees have referred to clients as “muppetts” before.

If I had no soul and unlimited access to the Federal Reserve’s balance sheet, I’d probabaly tell you to sell your gold to me also. What you need to remember is that real inflation north of 10% is already bordering on the development of a potentially hyperinflationary outcome.

The last episode of hyperinflation in a major economic power was Germany’s Weimar republic in the 1920’s. That concluded with Gold selling in billions and Silver millions of Deutsche mark’s.

Using GAAP accounting principles United States deficits have been north of 5 Trillion dollars since 2004. Still think metals are a sell? Still think the economy is recovering nicely?

The Bank of England this week took the extraordinary step of allowing University of Nottingham chemistry professor Martyn Poliakoff to video tour the BOE’s gold vaults. Why in the world would one of the largest gold depositories on earth allow a lowly chemistry professor to video the gold (some say tungsten) vaults?

One word….Repatriation. That one word is striking fear in the hearts of the 11 primary market makers that drive the LBMA system on a daily basis. LBMA, is the London Bullion Market Association. This market is driven principally in the paper futures market. The major players involved are Barclay’s, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Merill Lynch, Mitsubishi UFJ, Societe Generale, UBS, and Bank of Nova Scotia.

Since Germany’s repeated requests to view gold stored at the New York Fed, and repeated denials for access by US officialls, the heat is now on. Country after country is now attempting to bring home the real money in waves.

This is putting incredible pressure on the LBMA, Comex, and other major metals dealers to put up or shut up. If you follow the bouncing ball on import/export numbers country to country it becomes obvious how much of a shell game delivery of metal in size has become.

In short, these banks are at the precipice of being caught with there collective pants around there ankles. Hence the Goldman sell call. Call it “Band of Brothers” for banking pschycopaths.

For decades these banking institutions have used a “carry trade” to lease gold for a profit. Thousands upon thousands of tonnes of real “hold in your hand gold” has been “leased” to asian buyers. This gold is never coming back.

The Bank of England knows that. The US Federal Reserve knows that. That is why both are very interested to never allow anyone “inconvenient” to view or professionally inventory something they say is in the vault but is simply not there.

All things that cannot continue will simply one day end. John Williams’ position is that hyperinflation will become a reality in the United States by the end of 2014. In all reality who freaking cares if he is wrong?

Does that change the realities of the end of the debt supercyle? Does that create a huge new energy source that is cheap and abbundant? Does it change 5000 years of history with paper money? Does it change demographics that say there are destined to be more takers than producers in major developed economies around the world?

I think the answers are “NO”. I think the metal is not there. I think the numbers in general are sh**. I think the longer precious metals markets are “managed” the greater the damage not only to future supply but also to the prices in paper money terms. These things will have to climb to bring in capital investments needed for incredibly tough businesses.

Precious and base metals along with oil do not simply leap out of the ground in quantities vast enough to sustain life without enormous capital allocations continually flowing into these businesses.

Take a look around the world. Atlas is shrugging left, right and center. When the paper hits the fan the people holding the metal will be the last men standing. Goldman Sachs knows this. Don’t be a muppet.

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