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Stimulus Towards a New Global Currency
I recently discovered the following half-finished commentary, which, according to my file archive, was written on May 6, 2012 – 11 months ago. I will make no further comment on the piece itself as I feel that its content speaks for itself.
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There is no denying that the tendency of mankind is to willfully ignore glaringly obvious warnings of excess inthe pursuit of self enrichment. Never has that been more apparent than in the present dire financial circumstances. The inability of monetary stimulus to stimulate, and the futility of interest rate easing, should otherwise serve as clear signals that the destructive course we are on is precisely that. The spread of debt cancer.
I am suffering another bout of technical frustration this weekend, and so this letter is going to be brief. The main letter will have to come out next weekend, as my primary computer is in having surgery. So I’m typing all this on my iPad, and no, not with the on-screen keyboard. I bought myself one of those wireless mac keyboards and so its not quite as painful as it sounds. But this is the second attempt at writing to my subscribers this weekend, as for some perplexing reason, the last one I wrote and which I was half way finished has mysteriously disappeared. If you’re reading this, I evidently had some success.
Now to business.
Friday’s dismal market performance is the point on the exclamation mark of just how crappy markets have become. Negative U.S. jobs data, incrementally growing panic at the cascading debt bombs exploding in Europe, the collapse of the Dutch government, the election of a leftist in France, and the apparent inclination towards a very hard landing indeed by China – all these things have created a “perfect storm” of global financial chaos.
Risk aversion is the key theme, and paradoxically yet again, U.S. Treasurys are the beneficiaries of the “safe-haven” fraud perpetrated on the world by mainstream media, the U.S. government, and their button men at J.P. Morgan et al. The Canadian stock markets are rolling up so fast that, in the word’s of my good friend and advisor at Macquarrie Wealth Management, “Its not safe to put up a bid son!”
I’ve had a few very interesting conversations with some of the industry’s centrally positioned bankers, and there is a sense of the end of an era being at hand. Now of course, given the unpredictability of the U.S., and their apparent inability to embrace the concept that more debt and credit and currency is the very remedy upon which the global patient is now convulsing, QE3 could be the last straw on the camel’s proverbial back before its lights out for half the world’s financial institutions.
So the key strategic message in this letter is this: Buy nothing.
Everyone in the investment industry is parading the now very tired and flimsy “stocks are so beat up, its a buying opportunity”, but don’t you believe it. Yes – stocks are incredibly cheap. But guess what? They’re about to get a LOT cheaper.
What is unfolding, or arguably, has already transpired, is the obsolescence of the public company model for natural resources. The paper currency that has been used to finance exploration, development and production, is now so excessive in the system, that nobody wants it.
I know of companies who have over 50% of their construction capital in hand, and still can’t raise one thin equity dime. Financings are being amended and cancelled faster than you can say “Jack the bear”. Investment firms are slimming down agressively on the human resource side, and many funds are liquidating because they’ve lost so much money. Batten down the hatches, my friends – we’re in for a helluva storm.
Here’s why:
A share in a public company used to imply that if the company discovered something of value with your investment dollar, then you should be able to count on the value of that share rising in proportion to the value of the asset being developed by the public company.
But whats happened is, investment banks have themselves fallen prey to their own success, where hundreds of companies and billions of dollars could be raised for myriad commodity projects, and financings and their component investment dollars could reliably be cycled through every 4 months, which is the time an investor in a private placement is obliged to hold onto a share it purchases in such a financing before it eligible for sale on the stock market. Investment banks have been forced to become volume shops instead of the quality oriented shops they once were, because they’ve grown to hundreds of employees all needing a desk at some prime real estate location in a downtown financial district.
Rents and salaries are not cyclical – they are constant. People need to go to work and eat and pay rent every day or month. Markets however, are not. So while markets cycle, banks are forced to continuously issue paper, thereby undermining the value of the whole market as continuously and reliably as people need to work and eat.
So now the banks are full up on paper, a drill hole home run no longer means a share price will go up, and the equity value of every company share is in freefall. The entire resource industry, outside of mid to major producers, has just seen its investment status revalued to junk.
I’m going to go out on a limb a bit here and estimate that the resource industry will now go into a state of virtual stasis for a period of at least 4-5 years. Unemployment is going to soar, and is in fact soaring, in the U.S. China’s thump thump landing is about to remove all the demand from the equation thats been keeping the rest of the world going on life support for the last two years. Spain is about to tumble, as is Greece, France, Italy and Portugal, then ultimately, Germany, the U.K and the U.S.of A.
That “recovery” that has been shilled by the U.S. and the global financial media empire it employs has only been the deferral of the inevitable by rampant debt, credit and currency fabrication. The standard of living in the first world is about to take a huge tumble downward.
So what do we do?
Here’s what I’m doing. I’m lining up business opportunities that don’t involve the stock market. The paradigm shift that has just transformed the investment landscape into an even more exclusive, mysterious, and hazardous place has also revealed some outstanding opportunities. But again – I’m not talking the stock market.
Oh sure, if you’re lucky enough to be on some broker’s list who can get you a couple of thousand shares of Facebook’s upcoming IPO, you’ll likely make a score out of that. If you’re sitting on a few billion and wondering what to do with it, go ahead and buy U.S. Treasuries. This will be a zero sum exercise, but until the next chapter in the unfolding saga, which will culminate with the incremental fall of the United States as dominant economic power, there is likely going to be no safer place for such sums.
Buy gold and silver? Here’s what you’ve got to understand about gold and silver’s new place in the global pecking order:
Since the United States and every other first world country is incapable or refuses to regulate correctly the commodities futures markets, the banking industry in the top layer has essentially been given the U.S. government’s blessing and assistance even, in making sure that futures markets determine commodity prices, and not try to discover future price movements, as was the original function of futures markets.
By creating massive short interest in any commodities future contract, the banks send a clear message to participants in the physical trade that the price is going to be forced lower by such a massive buildup of negative future interest. The effect of that on real investors’ willingness to buy and hold the physical metal or oil or agricultural product is profound and complete. They run for the hills! Then the banks buy and cover as the price dutifully dives, and guess what? Its China and the United States who are buying the majority of the physical gold, and hiding it from the rest of the world.
Why?
Because this is all a game. Its a coordinated strategy under execution to once and for all undermine free markets through the creation of a new global currency that will be trotted out by the IMF just when all the world’s major currencies are poised to collapse in a hyper-inflationary supernova. It will be backed by in some way in part by gold, probably silver, and a basket of other commodities. No, this is not a return to a gold standard. It is the advent of a centrally controlled monetary system where your standard of living, future expectations, and your very freedom are determined by the new global currency.
It will be heralded as the great solution to the world’s market instability, the balm that soothes the volatility, and the tonic that will elevate all of humanity to a uniform minimum standard of living.
Or am I losing my grip? Have I possibly succumbed to all the fear-mongering and conspiracy theory that is the ubiquitous tone of nearly every alternative contrarian commentator who have one thing in common – the lack of a mainstream audience? Is it conceivable that from where I sit at ringside in the industry that I’ve become completely delusional as a result of sitting too close to the trees to see the forest?
All is possible. But lets temper the hysterics with some comforting “simple truths”.
The world is not going to come to an end, nor is the “economy” going to completely collapse. Oh sure, there may be a 50% downgrade to the average family’s buying power, and a meteoric rise in unemployment, but thats going to create its own opportunities. One might even make the argument that, since we in the first world have admittedly been living well in excess of our means for the last 50 years, that this is a natural corrective event that is ultimately going to improve humanity’s chances to survive beyond the calamitous riots and rampant crime wave that must needs accompany such a natural realignment.
But lets assume, for a moment, that life in the United States is going to more closely resemble life in, say, Buenos Aires, or worse, Nairobi. In these places, every movement, every trip, virtually every step, must be contemplated in the context of personal security vulnerabilities, as opportunistic property crimes and crimes against person are the most common forms of employment in these places.
Cities and towns will be surrounded by badlands where decent folk won’t dare tread after dark. Walled and gated communities will be connected by secure transportation routes that are protected by security personnel and systems, all of which will be a feature of the “upper class”, and be paid for in municipal tax schemes.
—END—–
The reason I decided to publish this today was because I was surprised when I first discovered it, I though – thats funny I don’t remember writing this. Well obviously, because it was a year ago!
The point here is that we can see clearly that all of the forecasts in this comment have come to pass – except the new world currency – and so the world is very much evolving according to a predictable outcome.
Consider subscribing to my free newsletter if you want to be informed on the best possible strategies for surviving the coming onslaught.
The post Stimulus Towards a New Global Currency appeared first on Midas Letter.
2013-04-06 09:04:16
Source: http://www.midasletter.com/2013/04/stimulus-towards-a-new-global-currency-james-west-1304061/
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