Thursday, August 25, 2011

The upside for gold and silver will knock your socks off - John Embry

With no easy solutions to the globe's debt problems visible, Sprott Asset Management's John Embry expects gold and silver to be significant beneficiaries but the road ahead will not be easy.

Author: Geoff Candy
Posted:  Wednesday , 24 Aug 2011 

For many commentators, gold is considered not only a constant store of value but, also, a barometer for the health of the global economic system and the currencies that pump through its veins.
For, John Embry, chief investment strategist at Sprott Asset Management, the current parabolic rise in prices, which have beat even his optimistic performance expectations this summer, is indicative of the unsustainable debt situation in which the world now finds itself.
Speaking on's Gold Weekly podcast, Embry explains, "We've reached a stage in the debt cycle where it doesn't appear we can move forward and on that basis you need more and more debt creation to generate the same dollar real GDP growth - and I don't think we can get that kind of debt growth.  So to keep these systems stuck together they [governments] are going to have employ quantitative easing in massive quantities, and if they don't, the current softness in the economy is going to turn into a rout."
Given the current levels of growth, Embry says, any halt in the funds propping up the banking system will result in significant deflation in "fairly short order" because the deflationary pressures within the West are huge.
But, he says, it is not just the West that is likely to suffer. "The Chinese miracle is grinding to a halt, they've dined out in the West for years and they paid for it by taking back our crappy paper but the fact is that they kept their economy going at breakneck pace and I would also say it is probably one of the most unbalanced economies I have ever seen.
"They have depended so heavily on exports and capital spending and now the export markets are weakening at the same time they have massive over capacity.  So those two engines are coming to a halt and the hope is that they can do lateral arabesque into consumer demand to keep the thing going.  I think that will be a hard act in the short run and consequently China faces some fairly difficult economic problems going forward.
What this means for prices?
While this rather bleak scenario does not bode well for the financial system as a whole, gold's performance over time [as well as that of silver] is likely to "knock your socks off", Embry says. But, he adds, especially after this latest move, he would prefer to see a correction in prices before that happens.
"I don't want to see this thing just scream away and become out of control and conceivably if you got a strong effective action in either Europe or the United States - that might be the catalyst for a significant correction of a couple of hundred bucks - but having said that I don't see the easy solution."
Embry points out that it is also important to note that, "It's not gold and silver that are doing anything.  There have been constant stores of value for centuries.  It's the value of the paper money that they are being denominated in that is at risk here and you know every attempt in history, fiat paper currency has always ended in tears and this one has been going for 40 years since Nixon closed the gold window and it's probably in its terminal stages."
Indeed, he is of the belief that the world will ultimately see a return to some kind of a gold standard.
"When we do have to recast the currency system, just to restore confidence there will have to be some backing that maintains discipline - and gold has traditionally filled that role.  So I can see gold being introduced as a maybe fractional reserve like there was before 1971 in the United States.  but to do that given the amount of paper out there and the limited amount of gold, they would have to mark the gold price up dramatically."
And, while he cannot put any kind of timing on such an event, he does think that gold could move as high as $2,500 within the next twelve months.

U.S. Mint Suspends all Numismatic (Eagles) Gold Coins as of August 22 2011! Proves no physical gold.

U.S. Mint Suspends all Numismatic (Eagles) Gold Coins as of August 22 2011! Proves no physical gold.

Greenspan says that gold is not in a bubble 
AUGUST 25, 2011
Former Federal Reserve Chairman Alan Greenspan said fissures inEurope’s common currency may lead to slowing in the U.S. Economy.
“The euro is breaking down and the process of its breaking down is creating very considerable difficulties in the European banking system,” Greenspan said today in Washington.
Emergency steps such as unlimited loans from the European Central Bank are keeping many banks in GreecePortugal, Italy and Spainsolvent and easing lending by other Europe institutions. Greenspan said a contraction in Europe would hurt profitability and stock values of American companies since Europe is the target market for about 20 percent of U.S. exports and about 20 percent of foreign-affiliate earnings.
A lack of confidence in euro-denominated debt is straining the region’s banks, Greenspan said. “That stuff has always been thought of as the ideal collateral and now it’s getting highly questionable,” he said in a question-and-answer session at the Innovation Nation Forum in Washington.
“The problem is that there is a growing cleavage in the economic and analytical and banking circles as to whether the Euro, which is the crucial issue here, should be 17 countries with very significantly different cultures” regarding the role of government, Consumer Spending and inflation, Greenspan said.
Asked if the breakup of the euro was one possibility, he replied, “obviously.”

‘Less Worried’

Greenspan also said he is “less worried about a double-dip than most people are but I’ll certainly grant that the odds are rising,” referring to the chance that the U.S. economy will return to recession. “The reason we are so sluggish is the level of uncertainty.”
The economy grew at a 1.3 percent annual pace in the second quarter of 2011, according to the Commerce Department. That followed growth of 0.4 percent in the first quarter, the slowest since the second quarter of 2009, when the economy was still mired in recession.
One gauge of the economy’s momentum, the Chicago Fed National Activity Index, improved to minus 0.06 in July from minus 0.38 a month earlier, the regional bank said yesterday. The index is a weighted average of 85 economic indicators, with readings less than zero indicating “below-trend” growth and average readings below minus 0.7 percent over three months signaling an increasing risk that a recession has begun, according to the Chicago Fed.
Greenspan said Aug. 7 on NBC’s “Meet the Press” that the chance of a return to recession “depends on Europe, not the United States. The United States was actually doing relatively well, sluggish, but going forward until Italy ran into trouble. That destabilized the European system and the crisisreemerged.”

Asset Purchases

Concern about the government debt of Italy and Spain prompted the European Central Bank on Aug. 8 to begin buying Italian and Spanish assets to lower their borrowing costs, as Europe’s sovereign-debt crisis nears its third year.
A four-week global equity rout has wiped about $8 trillion from companies’ market value as Europe’s sovereign debt-crisis and worsening economic reports in the U.S. raised concern the global economic recovery is faltering. The S&P 500 fell 16 percent from July 22 through the end of last week and its members trade at an average 11.3 times estimated earnings, near the lowest level since March 2009.
The Standard & Poor’s 500 Index advanced 0.9 percent to 1,134.34 at 10:23 a.m. in New Yorktoday.
“What has been the greatest thrust coming out of the recession has been the extraordinary rise of stock prices in the U.S.,” Greenspan, 85, who was chairman of the central bank from 1987 to 2006, said today.

No Gold Bubble

Greenspan also said that he did not think gold, which reached a record above $1,900 an ounce this week, was in a bubble.
“Gold, unlike all other commodities, is a currency,” he said. “And the major thrust in the demand for gold is not for jewelry. It’s not for anything other than an escape from what is perceived to be a fiat money system, Paper Money, that seems to be deteriorating.”
After leaving the Fed, Greenspan founded the consulting firm Greenspan Associates and has been a consultant or adviser to Deutsche Bank AG, Pacific Investment Management Co. and hedge fund Paulson & Co.

Buffett Bailout Of BAC Sends Stock To Early August Levels, Changes Nothing

Tyler Durden's picture

The Buffett bandaid move, coming 48 hours after Buffett's conversations with Obama, and which also comes oddly enough just 24 hours before Bernanke was expected to announce QE3, succeeds in temporarily sending the stock back to early August levels. It also succeeds in sending the financial sector higher, which as we explained yesterday is the main reason for why the 2s10s had to be steepened, so as a result Operation Twist now can go back to its original formulation of broad 2s30s flattening and result in purchases of bonds across the board. As for what to expect with this surprising move out of Omaha? Absolutely nothing. The $5 billion in cash, unlike Buffett's investment in Goldman, will be laughably insufficient, considering that the bank's mortgage exposure is in the tens of billions, while its litigation liability is another $20-30 billion. This does nothing to change our thesis that BAC will need to come to the market again and again to raise capital. However, as this "raise" confirmed, BAC only has access to private investments: we hope Buffett has very deep pockets to keep doubling down. The other news to come out of this -Paulson will be saved with another deus ex machina and will not need to sell his gold or GLD holdings, removing the liquidation overhang from spot gold. The only good news out of all of this: the taxpayer bailout of Bank of America, when it comes, will be $5 billion less.
Here is a track record of Buffett's previous bailouts:
  • GS deal struck Sep. 23, 2008 while GE deal struck Oct. 1, 2008.
  • GS fell 67% from Aug 25 $155.71 to low of $52 on Nov. 20
  • GE fell 42% from Oct 2 $22.15 to low of $12.84 on Nov. 20
  • NOTE: Buffett warrants in GS, GE were worthless by Oct. 8, 2008 amid rout in stocks
BAC since the beginning of the year:
And the, traditionally shady, HFT trading on the news:
Lastly, here is Peter Tchir's take:
So after denying the need for capital, BAC has decided to give a great deal to Mr. Buffett?  He invests 5 billion in preferred shares.  These pay a 6% dividend (cumulative).  So anyone who bought shares yesterday at $7 was hoping to geet a 0.57% dividend yield, non-cumulative.  So much better current income, the cumulative gives an additional advantage, and if it all goes bad, he is higher in the capital structure.  The preferred are callable by bofa at 105% of par.  So if they call the preferred shares Buffett will get 5.25 billion.  He has warrants to buy 700 million shares at 7.14.  He could have bought 700 million shares at 7 (the closing price).  That extra 14 cents on 700 million shares, is $100 million.  But he will have made $250 million on the preferreds getting called, so net even if he converts to shares, he will have made an extra $150 million.  This may be great news, but in many ways it stinks.  Will BofA actually get sued by some existing shareholders this time around?  They seem to have made legal mistake after legal mistake, and it is possible existing shareholders won't be so happy to see such a sweatheart deal go to someone else this time around?
When the stock opens above $8, I expect we will see all sorts of reports on how much the value of the deal is to Berkshire.  The same thing happened with Goldman and GE back in 2008.   GS went on to new lows after the investment.
Buffett gets - high income, some seniority, and cheap options.  BofA pays up to get capital they didn't need.   Market is going to react positively, maybe for a long time, but I think it would have been a much stronger signal if he bought $5 billion of common shares at $6.50.

Monday, August 22, 2011

Is there a Correlation between Buffalo and Silver?

Buffalo was abundant at one point in human history and vital to way of life is Silver experiencing the same fate?


Friday, August 19, 2011

Ron Paul & Mike Maloney On Gold and Silver (Flashback)

Ron Paul & Mike Maloney On Gold and Silver (Flashback) 

Gold vs Dow Jones Industrial Average since 1971! U.S went off Gold Standard - August 15, 1971!

Gold in 1971 = $35 ... Gold today: = $1,850.
Dow in 1971 (December 31) = $890.20 ... Dow today: = $10,868. 

Gold has gone up over 52 times since 1971 as of August 19, 2011. 
Dow has gone up 12.2 times since 1971 as of August 19, 2011.

Dow's all time high 14,164.53 on October 9, 2007. 
Dow's all time high has shown an increase of 15.9 times since 1971. 

Important to note: General Electric is the only remaining stock of the original 12 stocks that formed the Dow Jones Industrial Average. 

The Dow Jones Industrial Average was founded by Charles Dow on May 26, 1896.

Gold has been around much longer than the 115 years of the Dow. Thus this could be one of the most shocking revelations of our time why do so few own gold??? 

Disclaimer: Gold did not pay "The Silver School" to write this.  

Thursday, August 18, 2011


Egon von Greyerz
Matterhorn Asset Management AG - 15 August 2011
The Stealth Market in Gold
Gold has gone up for 12 straight years in a stealth market. In the last ten years gold has had a compound annual growth of 20.5%. This is an absolutely outstanding return but investors should not look at gold as an investment but as money. Gold reflects governments' deceitful actions in totally destroying the value of paper money by printing unlimited amounts of it. With gold up 7 times since the bottom in 1999, is it too late to jump on the Goldwagon?

The answer to the above question is a categorical NO. Virtually no major investor group has participated in gold's spectacular rise. In spite of a seven fold increase in the gold price, only circa 1% of world financial assets are invested in gold. Whenever I talk to major institutional investors, not only do they not own gold, but they don't understand gold either. I was speaking at a conference for Family Offices recently where there were circa 250 family office managers present representing substantial funds. Not only did no one own gold, but they had no understanding of gold's role as an investment class or the fact that measured in real money, i.e. in gold, their investments were declining precipitously. It must be unprecedented that an important asset class can go up for such a long period with so few investors participating. In my view this is the most bullish sign ever for gold. The mess the world is in will lead to unprecedented money printing in the US, EU, the UK and many more regions. And gold will continue to reflect the destruction of paper money. In addition, investors will increasingly mistrust paper gold and invest in physical gold only. Due to the very limited availability of physical gold, the increase in demand can only be satisfied at substantially higher prices.

Gold Price Projection
There are many ways to project how high the gold price can reach. Adjusting gold for real (not the published, manipulated) inflation the price would be circa $7,500. At the recent GATA conference, Adrian Douglas put forward a target of $53,000 an oz based on M3. He said that that out of every 33 oz of gold traded 32 oz are paper gold, which would lead to a price projection of $53,000 also, if all trading were backed by physical gold. The following chart shows where gold would be if the US gold reserves were at the same percentage (52%) of us debt as in 1913 when the Fed was founded. Gold would then be $27,000 today and going up to $33,000 in 2015 with a projected increase in debt of $ 6.5 trillion (6.5T).

All of the above projections are subjective and therefore somewhat arbitrary. However, whatever method is used, gold is undervalued on any measure. We are not just talking about a substantial undervaluation but more importantly that paper money is likely to be totally destroyed in the next few years with the gold price reflecting this obliteration. It is absolutely impossible to forecast how much money will be printed but the flood of paper could lead to many zeroes being added to the gold price just like in any hyperinflationary economy. For example, in 1923 in the Weimar Republic gold reached 100 trillion marks. Gold (and silver) is a critical asset to hold in order to preserve wealth against such a hyperinflationary destruction of paper money.

Physical versus Paper Gold
Circa 96% of all gold trading is paper. For anyone who demands delivery, there will be no gold to deliver. At the GATA conference in London Jim Rickards stated that currency wars will lead to the US government taking back (confiscating) whatever gold it has lent to bullion banks as well as gold it holds for other nations (most of Germany's gold is said to be held in New York). He also mentioned a potential 90% windfall tax on gold. In a subsequent King World interview (click to listen), Eric King discussed with Rickards that the US government has keys to Via Mat's US vaults.
It is of course not possible to predict what desperate governments will do, nor is it possible to protect yourself against every eventuality. What is very clear is that simple action can and will give investors a better chance of preserving wealth:
  • Only buy physical allocated gold/silver bars or coins
  • Store the gold outside the country where you are resident.
  • Store the gold in a country with a stable political system (like Switzerland)
  • Store the gold outside the banking system in vaults with no US connection.
  • Make sure you have personal access to your gold and/or silver
Gold Making New Highs
Gold has recently made new highs against most currencies. In addition, after longer consolidations, the Dow is breaking down against gold (down 85% in 12 years), and gold is breaking up against both Oil and the Swiss Francs.

These break outs are potentially very significant and will most probably lead to a strong up-move in the gold price in the next few months.

Kicking the Can
The world is in an absolute mess, economically, financially, politically and morally. And let me be very clear; this has been evident for at least 10-15 years. The only thing that has not been clear is how long governments and central banks could deceive the people by kicking the can down the road in an endless creation of worthless pieces of paper that they call money. The lone voices of some market analysts, forecasting that the manipulation and mismanagement of the people's wealth would end in disaster, have for long been silenced by the establishment in order to betray the gullible masses.
Intellectually dishonest and corrupt politicians and bankers have devised a system which has created perceived, debt-based wealth for the people whilst buying votes and generating massive wealth for the bankers.

But this Ponzi scheme is now coming to an end. When printed money can only be repaid with more printed money and when there are no buyers for the worthless debt instruments created by governments except for the government itself, then we have reached the end of the road with a "can too big to kick".



Two years' ago in the summer of 2009, I wrote an article called "The Dark Years Are Here" which outlined the likely consequences of the excesses of the last century. Let us just look back to understand the historical perspective.

Throughout history there have been regular periods of credit creation and money printing resulting in a collapsing currency. This happened for example as the Roman Empire was disintegrating starting circa mid 200 AD. So destruction of money is not a new phenomenon as Voltaire said already back in 1729 "Paper money eventually returns to its intrinsic value - ZERO". But so far in history these events have normally been limited to one country or region. Never before in history has there been a financial system which has made it possible for the whole world to simultaneously create unlimited amounts of debt.

The graph below shows the effect of this money creation in the US but the same applies for many parts of the world. Between early 19th century and early 20th century there was virtually no inflation. A house cost the same in 1910 as in 1810. But then in 1913 the fraud in the financial system started. Private bankers in the US created a private central bank owned by the bankers and for the benefit of the bankers. This was when the Federal Reserve Bank was created with ultimate power to print money and thus destroy the value of paper money. This was the most perfect way for private bankers to control financial markets with the total blessing of the government. Thus started a worldwide credit manufacturing scheme that eventually will lead to a collapse of the financial system. In order to inflate this bubble even faster, Nixon abolished gold backing of the dollar exactly 40 years ago on August 15 1971. Nixon should not have been impeached for Watergate but instead for destroying the world financial system and world economy for many generations. Since the closing of the gold window in 1971, total US Debt (private and public) has gone from $10 trillion to almost $60 TRILLION today.

US Debt Ceiling
What has taken place in Washington in the last few weeks is absolutely disgraceful. Irresponsible politicians have been spending months bickering about the debt ceiling and disagreeing until the very end how to solve a crisis that will bring the US down. It is appalling that they, out of self-interest, take this issue to the wire when the country is in the process of going under. The whole procedure is only about political posturing and buying votes rather than caring about the good of the country. The politicians are rearranging the deckchairs on the Titanic whilst the country is sinking into the abyss.
The debt ceiling is totally irrelevant. US Federal debt has increased every year since 1961. Thus for 50 years the debt has gone up yearly and during that time the debt ceiling has been raised 79 times! The real issue is that the US is bankrupt and raising the debt ceiling only exacerbates the gravity of the country's problems. What they should have agreed instead is a substantial reduction of the debt ceiling. But that doesn't buy any votes.

Another debt rise agreed of $2.4 trillion (in two stages) will probably last a year at best. Proposed spending cuts of $2.1 trillion will almost certainly never happen but if they do they will be after 2013 and probably mainly take place at the end of a 10 year period starting from now. In the meantime the debt is likely to increase by tens of trillions of dollars.

Sadly it doesn't matter what the reckless politicians do. This situation is unsalvageable.
The exponential growth in debt in the last 100 years has created a false prosperity by mortgaging the future for many generations for the benefit of current consumption. Wealth based on credit does not only steal from future generations but creates the wrong values based on debt, greed and materialism. Values such as honesty, integrity, courteousness, righteousness, respect and kindness have totally disappeared in large groups of the population. And the family is no longer the kernel of society. Recent social unrest and riots in the UK is an inevitable consequence of this social decadence. With youth unemployment at 25% in many countries and as high as 50% in the major cities, this problem will become unmanageable in the next few years. Failing economies and empty stomachs will exacerbate the situation dramatically.
Also, since government (and the bankers) control the system by creating money out of thin air, major resources in the economy are transferred from the productive and innovative private sector to the totally inefficient, unproductive and bureaucratic public sector. The public sector only consumes wealth and does not produce anything. By taking invaluable resources from the private sector, consuming most of what it takes and then giving the rest to the most unproductive part of society (the weak, sick, unemployed, work shy etc.), government perpetuates the worst part of the economy and destroys the ability of the nation to expand.

The point I am making is that the last 100 years are exceptional in history because this period is based on an unprecedented worldwide debt creation and money printing but not on the natural laws of supply and demand or saving and investment. Exceptional things never last since the laws of nature can only be broken for a limited period. And we have now come to the end of the world's largest, government sponsored, Ponzi scheme ever. The consequences will be felt in all aspects of society and most likely last for a very long time, at least for several decades and maybe longer.

Add to the US debacle, the problems in Europe which are almost of the same severity. The European money markets are now starting to seize up as pressure mounts on the Italian, Spanish and French banking systems. It will be impossible for the milk cow of Europe to continue to support all the weak European countries. Initially the EU will accelerate the money printing because of political pride. But like all grandiose political unions, the EU will eventually break up.

Benefits Supervisor
by Lucian Freud

In Conclusion
The world is now staring into the abyss and we are most likely entering the Dark Years which I wrote about two years ago. The consequences will almost certainly be unlimited money printing and a hyperinflationary depression.

15 August 2011
Gold Switzerland - Matterhorn Asset Management
Egon von Greyerz

Bill Murphy - Silver is going to go berserk!

Buy Silver - Why Silver?

Eric Sprott & James Turk - Silver is extremely undervalued!



(Nearly everyone can buy silver dimes under $5 at $40 silver spot prices.) 
- The Silver School

Investing in silver. Junk Silver or .999 Fine Silver? By David Morgan. junk silver is the easiest way to get silver for cheap and it doesn't carry a premium price like Silver Eagles. Just go buy a few dimes.everyone should own a mix of junk silver. I have nickels, dimes, quarters and dollars. I'm looking for more small denomination junks silver for a SHTF scenario and need small barter money.I buy junk and 999 fine, they are both winners.Diversification is good idea even if it's just in your silver. One point many stackers miss is the need to 'make change'. If all one has is 1 oz. and the other one 'say's sorry no change' and one really needs the product one leaves money on the table. Also the distinction between .999 and .9999 is lost on most people. If the price is 1 oz. most people are going to shave some off and give it back to you if it's .9999. They'll just say tough @#$!. 

Video via

Silver Shortage This Decade - Good Video

(Silver may not be worth more than gold but shortages are developing) 

Thursday, August 11, 2011

Fast Effects of Massive Hyperinflation!

Are We There Yet? Are We There Yet? Are We… (Gold Bubble?)

(Information via
En route to $1,760 gold, many naysayers have responded with calls of a bubble. Some have impatiently exited the market, moving to cash, or back into the heavily manipulated stock market.
One of our favorite things to do is put things in a historical perspective. To that we present this chart:
Even after gold hit $1,722 (on yesterday’s close), the present bull market  is just a molehill when compared to the bubbles of yesteryear. 

Wednesday, August 10, 2011

Former Fed Chairman Alan Greenspan: "We can always print money"

Ron Paul: "Gold not a bubble"

Ron Paul: "Gold not a bubble"

AUGUST 10, 2011

We cannot guarantee the purchasing power of the dollar - Alan Greenspan

We don't have a system that is working we have a system that basically moves cash around. We can guarantee cash benefits as far out as you like but we cannot guarantee the purchasing power of the dollar. - Alan Greenspan (former FED chairman) comments from 2005 at a Senate Banking Committee.