David Zervos is…. “Giddy In Love”

Submitted by Thad Beversdorf  –  The First Rebuttal Blog

Screen Shot 2016-01-18 at 9.02.23 PMWell Zervos, I just got around to reading your 2015 year end QE love letter.

“The key for 2016 will be to drown out this nonsense with good old fashion QE loving. And so just in time for the New Year, we are bringing out some new swag to help spread the message of QE love. Attached is a picture of our 2016 hat. It’s simple – just a heart on the front with the letters QE inside”

Wow, too much of the 1985 Sassicaia or was it the Hibiki 30-year over an ice ball with a Behike 56??  Unfortunately as you awoke from your love potion induced haze you had to witness the worst start for markets of any year in US history.  Now I’m not one to get in between two star crossed lovers David, but you and QE might want to rethink this relationship.

I’m not going to sugar coat this David, QE is a but a Sirens’ song, full of tantalizingly dangerous temptations whose love is not coming back to you anytime soon, no matter how many hats you wear professing your love to it and no matter how many markets you chase it to.  And even if it were to endeavour some heartfelt return, you’d be wise to heed the lyrics of Lynard Skynard, “things just couldn’t be the same”.  Unlike the Free Bird David, QE has changed.  It’s older now and tired, it doesn’t pack the same punch.  David, it’s time to let go. Continue reading

A New Fed Mandate? The Labour, The Demand and The Holy Profits

Submitted by Thad Beversdorf  –  The First Rebuttal Blog

Let me say it has been a couple months since I’ve felt compelled to post which may account for the length of this latest piece but I hope and believe most will find it worth the full read.  A coffee and 10 minutes (ok maybe 15…) are a perfect compliment to this piece.

Well it’s official markets have moved into a frenzy of absolute insanity with 6% swings in expected future cash flows every couple days.  It means the models have broken down.  But price insensitive ‘investors’ managed to prevent a reconciliation between economic and market performance last year despite revenues and earnings now also having broken down.  It’s impressive and depicts the ability of the Fed to impact MARKETS if not the economy.

But it also highlights the incredible lengths CEO’s have (perhaps understandably) gone to defend market cap.  Now that the Fed has boxed themselves out of the equation, neither able to raise again or cut rates without either action punishing the market, it is back to the underlying fundamentals. And that means it is time to understand how the Fed’s policies and the market’s delusional expectation of perpetual earnings growth have led CEO’s to misallocate hundreds of billions in capital, actually destroying the mechanism for economic growth itself, namely, demand.

I’ve talked ad nauseam about how the natural bond between profit and labour has broken down (now don’t roll your eyes I’m about to take you to places you’ve never been before).  And this is a direct result of incredibly destructive economic policies, both fiscal and monetary.  I’ve discussed the idea that there is a mathematical critical point of narrowing income distribution below which an economy simply cannot grow no matter how much money is injected.

I’ve also discussed the idea that profits can only grow in the face of declining demand by cutting costs and contracting operations.  That is, cut labour and capex to reallocate those funds into income, share buybacks and dividends.  This is exactly what CEO’s have been doing for the past 6 years while they wait for consumer demand to improve.  However, I have also suggested there is a limit to the financially engineered earnings growth.  When the cash dries up so too does the engineering.  The hope in such a strategy is that demand returns before the cash runs out.

In early August I offered a chart and predicted an imminent major market selloff.  The basis was that earnings had finally rolled over despite the financial engineering.  The reason is that cashflow can only be supported by costless borrowing and operational contraction until the lending slows and all the fat is trimmed, at which point the well runs dry and the financial engineering becomes impossible. Continue reading

Who’s Profited Most from 7 Years of Fed Policy…. Well the Fed of Course!

Submitted by Thad Beversdorf  –  The First Rebuttal Blog

So I’m often asked whether I really believe that government and policymakers intentionally create laws and policies that hurt the people and help themselves.  My answer is typically that “if you’re asking me this question you know I do but you don’t believe me; so either do your own research or continue to live in the world as you wish to perceive it.  I’m not here to beg you to open your fucking eyes”.

I started this blog about 18 months ago and I have chosen to provide my research with no income attached to it.  It means I have no axe but the truth.  I spent 13 years in major international banks and have been on both sides of the double edged sword that makes the financial services sector a place to reap riches and also to be thrown to the wolves.  That is, I am intimately familiar with the system.  That said, what I’ve discovered is that really very little effort is required to see the world for what it is.

The closest analogy is probably best left to Orwell with Animal Farm.  Humans around the world have been molded to believe they are part of a system to enable them to get ahead.  While some do manage to find a path that has substantial monetary rewards the vast majority (and growing) have, whether they realise it or not, succumb to a role of Boxer, the cart-horse.

That is, our lives revolve around putting in 8 to 10 hours of labour each day for which we receive enough to feed ourselves and our families, have a warm place to sleep and some of us are able to obtain some credit from which we can enjoy things like new cars every few years (while rarely actually owning them).  However, in terms of reaping rewards we sew, it is simply not reality.  The current system has a clear economic hierarchy which began taking shape centuries ago in Europe.  The problem which seems to exist is that people are willing to look at a calendar, see that it’s Thursday but believe almost any (false) figure of authority who says it’s Wednesday.  Let me give you an example. Continue reading

Wanna See the ‘Trick’ in Trickle Down??

Submitted by Thad Beversdorf  –  The First Rebuttal Blog

In the chart below I’ve indexed real median personal income against real corporate profits (before tax w/o adjustments) to the beginning of 2009, the point at which central bankers implemented trickle down economics to rescue Americans from the largest gov/banking policy induced disaster in the history of the world.   Let’s have a look at the results of the bankers trickle down strategy….

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Go figure eh….  Anyone think moar QE is the answer??  We just won’t know unless we keep on trying I suppose… says Ms. Yellen and the Business Roundtable (click to see many of the very faces of those that reached their shifty little hands into the ass of the golden goose and pulled out trillions of printed dollars but left trillions in debt obligations for your grandchildren).

Anecdotally, for those of you that rarely leave the city, I was in a small town in Indiana not too long ago.  I stopped to get a bite to eat and prefer local diners to fast food.  Problem was almost every shop in what would have been a quaint downtown was boarded up.  I asked a lady if there was still a place to get a bite to eat in town.  She pointed me to the last shop at the end of the row.  I went in, sat down, ordered some food and couldn’t help overhearing the guys talking at the table next to me. Continue reading

Why Don’t You Explain this to Me Like I’m Five….

Submitted by Thad Beversdorf  –  The First Rebuttal Blog

Soc Gen’s global head of research, Patrick Legland, has gone on record, according to aMarketWatch article yesterday as saying that the selloff in developed equity markets has gone too far, and he provides reasons to support his claim.  First, he suggests the Chinese market rout has further to go but believes the fallout will be limited to EM and commodities.  Second, Legland believes that the US and other developed nations are protected by “well-armed central banks” evident by the 3.7% economic growth and the 5.1% unemployment rate and the Eurozone’s 3 year low unemployment.  Lastly, he suggests that due to central banks having created a bond market bubble bonds are no longer a safe haven and thus no longer a viable alternative to equities.  I will point out that Leon Cooperman also discussed on CNBC yesterday morning the fact that there are no viable alternatives to equities anymore and so equities remain in the secular bull.

While I admire Legland’s optimism I simply do  not accept his claims.  They are full of tragic flaws.  Allow me to colour code this for all those market ‘pros’ and PhD ‘economists’ who haven’t been able to follow the premise over the past several months.

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The chart depicts that this rout has just begun.  As EPS rolled over in the first half of this year, it signaled that ‘The Tide has Finally Turned‘ as I explained in a recent piece published Aug 2nd (just weeks before the selloff began).  In that research piece I told readers to “prepare for an imminent equity valuation reset” and explained why it would occur.  The above chart provides an explanation as if we are a 5 year old.  You see a correction is not a one week market selloff that then allows for the algos to push markets to new all time highs.  A correction implies there was a mistake that required fixing.  The correction is market valuations coming into this year with unsustainable EPS growth projections. Continue reading

A Wolf in Sheep’s Clothing

Submitted by Thad Beversdorf  –  The First Rebuttal Blog

This is a piece I wrote last year for Ron Paul’s Voices of Liberty.  Now although mainstream media has all but put a gag order on 9/11 memorial coverage, I believe this article’s message has never been more relevant and so I’m posting again at what is obviously poignant time.  I find it odd that we have 10 Hollywood blockbusters made each year about the holocaust 75 years on, but only 14 years after the event American media will no longer discuss 9/11, even upon the anniversary.  It is perhaps the most telling phenomenon about the secretiveness and mystery surrounding the horrific tragedy.

It was the sixth week of my first job fresh out of college. I was still eagerly excited for each new day. Having moved stateside from a small town in Canada to finish up university and then on to the big city of Chicago, I was still in awe of America. I was working in the north building of the Chicago Mercantile Exchange on the corner of Madison and Wacker. It was early morning and I was on the phone with Paul Salvio from our New York office when

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the phone went dead.

The day was September 11, 2001. Our New York office was on the 92nd floor of the World Trade Center Tower 1. None of the employees who had arrived to work that day survived. It is a moment that elicits strong emotions within me to this day and I know I’m not alone.

In the days and weeks that followed, while the world came together to mourn those lost and to condemn those responsible, our policymakers in Washington were working feverishly to find opportunity in this tragedy. Forty-five days after 9/11, President Bush signed into law the U.S. Patriot Act. Continue reading

Part I of ‘America – The Good, The Bad, and The Ugly’

Submitted by Thad Beversdorf  –  The First Rebuttal Blog

I wanted to start with The Bad and then move on to The Ugly so that I can end on a positive note with The Good.

So over the past couple days I’ve read several articles in which someone who is publicly an adamant proponent of righteous behaviour was exposed as being a complete hypocrite (think essentially any politician).  And this really got me to thinking about the epidemic that has befallen America.  We no longer have anyone in positions of trust acting with any sense of integrity.  Our policymakers, bankers, corporations, unions, etc., all of these institutions have become nothing but a mechanism to enhance the personal positions of those who have the ability to directly or indirectly control the actions of those institutions.

By the late 1990’s the world was in the most prolonged period of global peace since WWII.  Accordingly, military budgets around the world were being slashed.  And so those with the powers that be decided the world therefore required some new wars to ensure peace continued (not kidding that is exactly what they argued), as I evidenced in an article last year, The Most Essential Lessons of History that No One Wants to Admit.  Now the thing is, it’s not just politicians and policymakers that are devoid of any common decency these days but those who can manipulate every facet of our society.

Let’s look at central bankers for instance.  The other day David Stockman wrote a great article highlighting the ridiculousness of statements by the Fed Vice Chair, Stanley Fischer.  The point is Fischer is either out of touch, out of his mind or lying to us.  But it’s not just at the highest levels that we see this type of human decay.  Not at all.  Let’s look to an area that so many of us know intimately, the financial services sector.  Now there are a lot of examples we could use here but let’s look at a particularly interesting firm infamous for its culture of indiscretions.  Jefferies LLC, which used to be Jefferies & Company Inc., is a mid tier investment bank, similar to Goldman Sachs in that it has no retail branches. Continue reading

An Almost Perfect Predictor of GDP Growth and Bernie Lays the Boots…

Submitted by Thad Beversdorf  –  The First Rebuttal Blog

I recently watched a video clip of Bernie Sanders laying the boots to Alan Greenspan back in 2003, for Greenspan’s seemingly out of touch perspective of the average American.  Now while we do have a repentant banker in Greenspan, a rare phenomenon for sure, I found the scolding interesting in that essentially every accusation Sanders lays on Greenspan could be repeated today to our subsequent central banking gods.  During the video notice that all the figures Sanders explicates not only remain true today but have gotten far worse.  Particularly note the national debt figure which has now increased by more than 400% since then!!!  The clip is well worth the 5 minutes.

But so let’s dig in a little to what Bernie is really saying to Greenspan.  The overall theme of the trouncing is that the Federal Reserve, the keeper of American monetary policy, had implemented policies that clearly had done significant damage to the vast majority of Americans.  Specifically Sanders is suggesting that the policies were a cancer to the economic prosperity of Americans and all the while creating extreme wealth for a select few.  And while that is bad in and of itself, what Sanders finds despicable is that the Fed seems to not only deny the harm they were responsible for but Greenspan seemed to be alleging success by focusing solely on the massive wealth it had provided to the very few on top.

Now in a recent whitepaper by Stephen Williams, VP of the St. Loius Fed, a case is made that the Fed’s ‘recovery’ policies have not helped to boost the economy.  And while I agree with that conclusion, I feel the paper is a fraud.  Not only on the surface of that argument does it create a false dichotomy of either helped or not helped (dismissing the idea that the policies may have actually been harmful) but Williams explicitly suggests the policies were not harmful to the economy.  And that was the real intended message.  Remember nobody publicly denounces their employer without being fired.  And so if Williams keeps his job we know that this message was a coordinated message.  Further, by the structure of his argument the objective is clear.  The Fed is already setting up the argument that while they were not entirely effective in a recovery they are not to blame for the inevitable second coming of the credit crisis (a definite dead canary). Continue reading

The FBI Considers the IRS and DOJ, Domestic Terrorists

Submitted by Thad Beversdorf  –  The First Rebuttal Blog

Eventually it was bound to happen.  The ever increasing ambiguous laws that allow the government to prosecute, or worse, simply negate all Constitutional protections of its citizens would come back to hang them.  In an unusual circumstance, what is essentially one party in D.C. when it comes to matters of covering up governmental criminality, has split into a two party system.  Specifically, a sect of the Republican party known as Tea Partiers pushed unrelentingly to expose the criminality acted upon members of its own tribe by various government agencies.

The Tea Party was formed by a group of individuals around the country who wanted to get back to the ideals of the Constitution i.e freedom.  But the Constitution is kryptonite to the system.  And so those who organize to promote the Constitution were targeted by the highest levels of government.  What better weapon to attack those whose intention is to defend the Constitution than an unconstitutional agency that has essentially unquestioned authority.  After all it is always unclear who watches the watchman.  Well in this particular case, the FBI and DOJ would seem to have jurisdiction over actions consistent with those of the IRS.

Under the FBI’s own definition of a ‘Domestic Terrorist’ one MUST consider the IRS to be a terrorist organization as evidenced by the very recent discoveries surrounding the IRS’s own actions.

“Domestic terrorism” means activities with the following three characteristics:

  • Involve acts dangerous to human life that violate federal or state law;
  • Appear intended (i) to intimidate or coerce a civilian population; (ii) to influence the policy of a government by intimidation or coercion; or (iii) to affect the conduct of a government by mass destruction, assassination. or kidnapping; and
  • Occur primarily within the territorial jurisdiction of the U.S. …”

While the first characteristic seems to imply violence is necessary it should be noted that under the FBI’s definition of ‘International Terrorism’ they explicitly include ‘Violent acts’ within the definition.

“International terrorism” means activities with the following three characteristics:

  • Involve violent acts or acts dangerous to human life that violate federal or state law;
  • Appear to be intended (i) to intimidate or coerce a civilian population; (ii) to influence the policy of a government by intimidation or coercion; or (iii) to affect the conduct of a government by mass destruction, assassination, or kidnapping; and
  • Occur primarily outside the territorial jurisdiction of the U.S., or transcend national boundaries in terms of the means by which they are accomplished, the persons they appear intended to intimidate or coerce, or the locale in which their perpetrators operate or seek asylum.*

Continue reading

The Tide has Turned and These Charts Predict the Next Stop

Submitted by Thad Beversdorf  –  The First Rebuttal Blog

What we saw with the latest GDP reports is something truly remarkable.  A market that was explicitly told the past 4 years of economic growth had been overstated simply shrugged off the news.  That is, absolutely no price recalibration took place.  This really evidences beyond any doubt that there is no relationship between the economy and the market.  It further evidences the Fed’s increased proficiency in directly guiding the market.

Now I know this is not shocking to many of us.  But to watch the market’s blatant irreverence toward a report that, with the flip of a switch, removed 12% of the presumed economic growth from the past 4 years did strike me as remarkable.  It shows that the printing of economic indicators is nothing but theater.  There is absolutely no rational market explanation that the market traded flat to up on the day when current GDP missed estimates  and the past 4 years of growth was adjusted downward, all in the midst of one of the worst seasons for YoY deteriorating corporate revenues/earnings.

But more realistically what it suggests is the only player left in the market is the ‘buyer of last resort’, i.e. the Fed and its minion entities.  Certainly nobody wants to aggressively short the market in the face of a clear long only strategy by the Fed, but just as certainly no major money managers are longing this market.  Volume has simply dried up.

I’ve been writing for almost a year now about the economic cannibalism that has been feeding earnings growth.  I have discussed this concept with a dire warning that feeding earnings expansion through operational contraction is a short lived meal.  And well we are now seeing the indications that the growth through contraction has now hit its inevitable end.  Have a look at the following chart which is really the only chart one needs to study at this point.  The chart depicts S&P 500 adjusted earnings per share (blue line), S&P Price level (green line), S&P 500 Revs per share (red line) and US Productivity of Total Industry (olive line).

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I have normalized the parametres back to the early 1990’s so that we can better understand the absurdity of what’s been taking place.  Now there is a tremendous amount of information we can pull out of this chart so stay with me here. Continue reading

German Production is a Facade Built on Bad Loans…

Submitted by Thad Beversdorf  –  The First Rebuttal Blog

Well Greece and China have certainly taken away the need for Russia and ISIS breaking news so there’s that…..  How very nice that 2 of the top 3 global threats apparently provide the West some breathing room when we have other issues to deal with.  Surely this isn’t just the media determining what should be our concern and what should not?  But I digress….

I want to dig into the Greece situation to provide some clarity that I feel has been lacking in mainstream media.  The Greece situation is a terrible tragedy for the Greek people.  However, the real crux of the matter is out of their hands.  Money that is not there cannot be used to pay down debt.  And so while the referendum was symbolic it really didn’t change the course of history.  The true discussion and debate has been between Germany and the ECB and this dissent between the two is becoming ever harder to cover up.  The following quote from Reuters really brings this to light.

Draghi’s support for Greek banks came under attack from German Bundesbank chief Jens Weidmann, a senior ECB policymaker, who said it was up to governments, not the central bank, to provide any aid to Athens.
“Central banks need to show where their limits lie,” he told an audience in Frankfurt. “It needs to be crystal clear that responsibility for further developments in Greece … lies with the Greek government and the countries providing assistance – not the ECB Governing Council.”

You see as much as the ECB talks a big game with ultimatums of a forced Grexit, the ECB fears such a result more than the Greeks.  To understand this one only (and always) has to look at a stakeholder’s motivation.  The ECB is an entity that was created for the sole purpose of consolidating authority of European policy.  A central authority of Europe was impossible without a unified currency.  And so the Euro was dreamed up as the mechanism for a central European government.

But by the very same nature, if the Euro goes away so too does the central authority.  And if there is one thing we can all accept is that policymakers do not make policies that end their own reign.  The problem is that while the ECB prints the money to keep Greece in the Euro it is the Germans that fund a majority of the risk.  And this explains the earlier quote.  Weidmann was essentially reminding Draghi that while his title may represent the Emperor, he surely hath no clothes.  It’s about knowing one’s place when the bell tolls.

Now one mustn’t have too much sympathy for Germany either.  Certainly it is never easy watching a nation being forced into subsidizing the survival of another nation who’s domestic social policies have contributed to its economic breakdown.  That said, Germany, during the mid 2000’s drove its economy by delivering cheap loans to the peripheral Eurozone economies which were then used to buy German products.  Of the €800B or so that the Germans lent the periphery nations, much of that was lent prior to the credit crisis of ’08 (i.e. by their own choice).  A great discussion of the intricacies of the subject can be found at CERP’s policy portal, Vox, in a short article by Paul de Grauwe and Yuemei Ji.

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Continue reading

The Fed’s Fatal Flaw: A Predictable End

Submitted by Thad Beversdorf, Chief Economist – ABX / Bullion Capital

So last week a very savvy investor asked me my view (h/t Simon Popple) on – When and what will break the chains on gold by those seemingly omnipotent forces that so assuredly keep its price in check? In essence, the belief is (and I expect for most honest and impartial analysts this is true) that because there is potentially significant downside risk to a global monetary system built upon a currency to which gold represents the proverbial kryptonite (we’ll discuss why), there are checks in place within the system, to ensure that kryptonite doesn’t become too potent. The architects of the existing system would have been foolish not to implement checks on gold.

And due to traditional physical gold transactions being cumbersome in a world of click, point and trade, checks on gold come surprisingly simple (paper market). However, there now exists a broadening network of architects (think China’s Silk Road Fund, gold ATM’s in Dubai and electronic exchanges like Allocated Bullion Exchange) creating a modernized electronic infrastructure where physical gold transacts as efficiently as all other financial markets but while maintaining the inherent intrinsic and enduring value. Modern logistics for a monetary system with 5000 years of staying power will make it incredibly difficult to rebuild checks on gold subsequent to the death of the Fed.

Below I will provide the Hypothesis, Groundwork, Empirical Evidence and Conclusion that will speak to the title of this essay.   With that, grab a coffee and enjoy!

Hypothesis

The monetary system enacted in 1913 (and all fiat monetary systems), issuing currency backed by interest bearing indenture, was fatally flawed due to a requirement for its very survival to create an ever-increasing stock of money, without also providing the means for perfect investment, resulting in a system where debt ultimately consumes all profits and labour over time. A system only a banker could love. Because such a system is predicated on devaluation (by its requirement for perpetual growth in money stock) and because that sealed its fate, the system’s end was perfectly predictable upon its inception.

The system’s fatal flaw is inherent in that its very survival necessitates that each dollar supplied requires more than a dollar returned. With that the economy necessarily became a mechanism for ever increasing trade (cash) flow (a banking objective and function), conflicting with its natural mechanism as a means to a rising standard of living (a societal objective and function). The result being an unsustainable build up of debt by way of artificial money creation, which would force economic inefficiencies such that capital allocators would necessarily forsake labour for profits – an unnatural behaviour given labour (i.e. consumer) is the subsistence of profits in the same way profit (i.e. employer) is the subsistence of labour.

With that natural bond broken, the economy would become an impediment rather than a mechanism for growth. Ultimately the amassing inefficiencies overwhelm the monetary system’s ability to make adequate adjustments, transitioning it to the final stage of mass contraction (economic cannibalism – we have now entered this stage) and then death. This will result, as it always does upon the breakdown of intrinsically valueless currency systems, in gold’s chains being broken. Once again establishing gold as the basis for both transactional currency and storage of wealth (as we saw during the 1930’s banking crisis and then more recently with gold’s meteoric price rise post 2008 banking crisis).

This may sound like quite a grand hypothesis and I can see the monetarist disciples rolling their eyes already (as a Booth grad I know how you think!); and so to give the non believers a glimpse at the validity of the hypothesis, allow me to provide a quick observable microcosm lending significant credence to the subject hypothesis before we get started. Think about the 2008 credit crisis. The entire debacle began when policymakers decided to artificially create value out of nothing. That is, they wanted to create housing wealth to those that had not earned it as evidenced in the following excerpt from “The National Homeownership Strategy: Partners in the American Dream”, which was the Clinton Administration official proposal to the banking sector that kicked off the entire housing disaster.

“For many potential homebuyers, the lack of cash available to accumulate the required downpayment and closing costs is the major impediment to purchasing a home. Other households do not have sufficient available income to make the monthly payments on mortgages financed at market interest rates for standard loan terms. Financing strategies, fueled by the creativity and resources of the private and public sectors, should address both of these financial barriers to homeownership.”

And so false value was created but to each dollar of false value created was attached a very real obligation that required repayment of that dollar plus interest. And so despite an increase in trade flow (housing by way of mortgage, and consumer expenditures via inflated housing equity) the system predictably failed to achieve the only (impossible) premise for which the system relied on for its survival, namely perpetually increasing property values. And so the system collapsed as was entirely predictable.

As we know, the false value or the illusion of wealth creation ended with total wealth for 90% of the US falling by 40% (a staggering statistic that remains unimproved even 6 years on). The thing to understand is that this was entirely predicable and was predicted by Ron Paul in a 2001 speech to Congress (and Peter Schiff, and many others subsequently). The point being the system was fatally flawed from its very birth and so its death was, in fact, absolute and predictable. There was no uncertainty as to its fate, as the system design necessitated its own end. I will show that inherent within our monetary system exists a similar fatal flaw and predictable end.

The (Required) Groundwork

Now to truly grasp the when and what it is imperative to understand the how and why underlying the monetary system and it’s inherent fatal flaw. To do so requires laying some groundwork. And so let’s begin….

I believe a useful way to understand gold and its interrelatedness to the financial, economic and markets universe is as a physicist understands gravity in the physical universe. Relative to other forces it appears mostly passive and almost tepid. Something we pay little mind to despite being cognisant it is always there in the background. That said, gravity is ubiquitous and despite generally remaining on the “no danger” end of its continuum, given the right physical scenario (e.g. supernova), it becomes perhaps the only force in the universe that can literally tear a whole in the fabric of the space-time temporal, creating a point called the event horizon beyond which its attraction simply overwhelms all other forces.

Generally gold has a similar character in that it is the one monetary force that has stood the existence of human trade and there is no corner of the financial economic universe in which gold is rejected. Further, given the right financial economic scenario its attraction becomes stronger than all other assets and we’ve seen this proven time and time again, for literally thousands of years. The architects of the fiat banking system themselves are among the worlds largest hoarders of physical gold. That very fact alone should resonate to the non believers as one simply cannot explain it away. Bernanke once stated to a Congressional Finance Committee that he believed the only reason banks bought physical gold was tradition. And he should have either been prosecuted or fired, as he was either lying or grossly ignorant about his own organisation’s activity. Continue reading