Herding Cats and Central Planning

by Scott Causey, GWP Resource Correspondent

“It’s like trying to herd cats” is one of my favorite similes. Imagine, if you will, trying to convince 100 people that your way is the only and best way. Not just today or tomorrow, but for the rest of their lives. What would you put your chances at if tasked with this? How about 1000 people? One million? How about 330 million, the population of the United States? To have any chance of success, you would need some powerful tools. The first and most important would be to manage perception at all times. Perception that you were fair, honest, and most importantly, at a primal level to all human beings … SAFETY.

What is safe? The answer is as unique as the DNA within the 7 billion or so people that live on this planet. The vast majority of people are not analytic, critical thinkers. Safety, to them, is familiarity. Safety is what they think they know. We all work off assumptions or biases at some point in our lives and this article is not meant to be conveyed as holier than thou. What I would like you to do is sit in a quiet place and ask yourself one question; If the world’s financial system collapsed tomorrow, would I be better off in hard assets or paper?

Millions of dollars within the United States’ university system are spent on research every year. One topic that is repeatedly researched ad naseum is “Why do complex systems fail?”. I would submit to you that no system on Earth is more complex, convoluted and interconnected than global finance. Don’t you suppose there is good reason for that? If my shell game of 3 card monti is fast and complex enough, you don’t stand a chance. Even more incredible is that you may not recognize it was a game all along. The banking industry relies on your ignorance and subservience to retain the power to legally rob you.

Finance is a zero sum game. If I win, you lose. If you win, I lose. If you hold United States’ dollars as savings, how do you expect to win? Do you control when they print more and destroy the “value” of your savings? If you own a stock is that safer, or is it entirely possible an Enron management team comes along at some point and leaves you holding the bag? If you own a bond, are you not relying on your debtor to pay you back? How much do you really know about derivatives markets? How much risk do they pose to your wealth and why? Even if you wanted to find out, is the information public? Would you have time to do the research even if you did know where to find the information?

If you’re not an expert in your designated investment vehicle, then you’re not an investor. You’re speculating. You’re also taking the ultimate risk of a permanent impairment of capital. Many of the wealthiest men in America are either directly advocating owning tangibles or already have the majority of their wealth in them. Multi-billionaire and media mogul, John Malone, now owns 2.2 million acres of land in the United States. Why would anyone keep such a staggering amount of their wealth outside the financial system? After all, that’s a lot of property taxes to pay. Maybe it just boils down to this; Invest in what is knowable and stay away from what is not.

The total notional “value” of the derivatives market is now over something called a “quadrillion”. One thousand trillions, in other words. Can anybody honestly tell me how that’s going to end with any degree of certainty? To do so, in my opinion, would be arrogant. The structures in place to support these transactions are so large and complex it is almost beyond anyone’s ability to process likelihoods of future outcomes. The longer run view however will ultimately show the vast majority of these contracts for what they are. WORTHLESS.

After the market closed Friday, and with little fanfare, a court ruling was announced. The plaintiff was principally an organization known as “International Swaps and Derivatives Association”. Please go to this link and see for yourself who is a member of this organization.

The defendant in the case was none other than the CFTC or Commodity Futures Trading Commission. Why is a consortium of the most powerful banks in the world suing the CFTC? The Dodd-Frank financial reform passed by Congress in 2010 tasked the CFTC with, among other things, setting position limits in the futures market for commodities.  The banks are very interested, to say the least, in things remaining the same. The real reasons why should be obvious. If the average guy in the street ever got the wise idea to follow the lead of some of America’s wealthiest people and began to save and invest with hard assets instead of paper … Good night, Irene. The base of power that the banks have enjoyed for decades to run route Irish over your lives would be over. Literally “game over” for them. If you don’t believe that, you need to understand how fractional reserve banking works. The information is out there.

While the banks have won their lawsuit with the CFTC, this is not a reason to be despondent. It’s not often that your enemy gives you more time to prepare for the inevitable. Especially when he knows you’re on the ropes. The status quo in position limits absolutely guarantees incredible volatility in key commodities going forward. I look forward to the maintream media trying to explain oil at 200 dollars a barrel. That is something that the former head of the NYMEX exchange commented this week was an “absolute certainty” with news of an Iranian invasion. Don’t let the drive-by shooting days in commodities shake you out. Oil, gold, silver, platinum, copper, sugar … GET LONG AND STAY LONG!

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