Sunday, August 7, 2011

Some Thoughts On The Debt Downgrade Plus "No, Virginia, There Is No Santa Clause"

A lot of people have been asking me what I think will happen on Monday when the markets open.  And the fact of the matter is that I do believe that some people in the market knew sometime last week before Friday's close that the downgrade was coming and I think it was partially priced in to the Thursday/Friday action.  But we don't know how the stock market will react because we don't know to what extent Fed will intervene to prop up the markets.   For those who refuse to believe that the Fed/Government manipulates the markets to the extent that they can, consider this:  just last week the central banks in Japan and Switzerland openly admitted that they intervened in their respective currency markets and the ECB stated that it would buy sovereign bonds in the open market.  That's intervention.  And Reagan signed into law legislation that made it legal for the Government -  via the Working Group on Financial Markets - to intervene and prop up our markets.   So those inclined to believe that intervention does not occur are also those that still believe in Santa Claus...

Bottom line:  I don't know in the short term how the markets will respond to the debt rating downgrade because I don't  know to what extent the Fed will try to prevent the markets from accurately pricing in the event.  But I do know with absolute certainty that over the next three months gold and silver will go substantially higher and the availability of physical supply will become very tight again, as investors begin to really understand how essential it is to actually own and possess the physical metal in order to achieve the wealth protection benefits they have provided for over 5,000 years.

One more thought on gold.   The widely followed Jim Rickards offered his thoughts on who owns the U.S. gold - technically the Taxpayers' gold -  in an interview on King World News Blog.  You can read it HERE  Now, I have issues with a lot of Rickards' views and I believe that he is erroneously glorified by many.  But nothing is more infuriating than when he discusses the U.S. gold holdings as if the U.S. actually still owns it unencumbered by derivatives and leases and as if it actually is still in the possession of the U.S.  He has always completely ignored the entire body of research that has been presented in many forums which shows that it is likely the U.S. does not actually hold title to most of the gold as reported by the Treasury.  The Government is caught lying all the time and why people continue to believe in key financial reports from the Government is beyond me. 

Now, the first part of the interview with Rickards is quite informative.  But I lost interest when he starts discussing the gold as if it is still there.  Part of that is Eric King's fault.  I would like someone to ask Rickards why the actual gold itself has not been audited independently and completely accounted for since Eisenhower was President.  Even a powerful, long-term Congressman like Ron Paul has requested this audit and yet the Government refuses.  IF the gold is there, then there's nothing to hide and the Government should be willing to let all of us see it.  So, until we have actual proof that the gold is still there AND unencumbered by nefarious financial transactions, the Government is guilty until proven innocent and Rickards looks like an idiot for trying to intelligently discuss something that may in fact be a myth.

Now onto the downgrade itself.  The entire discussion in the public media forums - all of them - has focused on whether or not S&P's math agrees with the Government's.  This is complete political bullshit being tossed out there in order to deflect attention from being focused on the REAL problems, which are the REAL reasons for the downgrade.  Let's put the math discrepancy issue to bed quickly:  the Government's forward projections for our debt levels, spending deficits and GDP growth have been tragically wrong for decades.  As points out:  back in 2001, the Government projected that "net US indebtedness in 2011 would be negative $2.436 trillion, the ratio of debt held by the public to GDP would be 4.8%, total budget surplus would be $889 billion, and GDP would be $16.9 trillion."

Hmmm...just looking at that dismal forecasting, and knowing that GDP is light from the projections by about $3 trillion - or about 25% - the indebted level is off by over 500% - and the budget surplus forecast was retarded, do Obama and Geithner really have any credibility by which to question S&P's mathematical prowess?  And what really kills me is that everyone is discussing just the new debt levels AFTER the debt-limit deal.  Why are we not including the $7 trillion in GSE (FNM/FRE/FHA) debt that the Government has guaranteed?  This IS part of our debt load.  The new debt level therefore is NOT $16 trillion, it's $23 TRILLION.  So Obama and Geithner can take their arguments and shove them up their respective asses.

The Truth of the matter is that Obama should rightfully be wearing this rating downgrade because he was elected on promises to try and change and fix all the damage done by previous Administrations.  But Obama has done nothing because he has failed to exercise any leadership.  He is probably one of the weakest Presidents in the history of this country.  He campaigned by gloriously reading a bunch of grandiosities off of a teleprompter and made himself out to be some sort of reincarnation of FDR and Martin Luther King.  Instead, he's proved to be nothing more than a dirty dish rag for the corporate, banking and defense industry interests that control our Government.  The only CHANGE that Obama helped usher in is a rapid decline in the American standard of living.  Obama never really had a true plan of action to address the real problems facing this country.  Or if he did, he failed to exercise the true leadership that his idols - FDR and Dr. King - exercised in order to make those plans happen.  Instead we are left with a President who is really what was voted in to office:  someone who has never been in a position of leadership and someone who lacked a demonstrable track record of achievement.  In other words, we voted for failure and that's what we have.  And those who still hold faith in Obama are the ones who believe in Santa Claus, the Easter Bunny AND the tooth fairy.

As for the ratings downgrade itself, we got what we deserved, only we deserved to have it happen a lot sooner and we deserved a much more severe downgrade.  I saw this coming 10 years ago and started buying gold and silver back then.  Many people saw this and warned of this many years before I figured it out.  We were all laughed at and ridiculed by all the Santa Claus believers.  Well, now we - the Santa Claus disbelievers - are having the loudest laugh, but not the last laugh.  The last laugh will be reserved for when the U.S. dollar finally collapses.  As I've said many times in this blog, Orwell is smiling in his grave...


  1. Dave,
    Thanks for taking time out of your Sunday to share your thoughts on the upcoming week. I wish I had seen this coming ten years ago. I only had my eyes opened (at a couple of years ago. Still I'm better off than most of the sheeple out there. Please keep sharing your thoughts - they are much appreciated.

  2. I like Rickards(he helps you with the end game..think about it...gata welcomes him?)...but he's a pseudo agent for someone(they are trying to legitimize the gold fraud with financial sophistry)..just look at his background....the other subtle message is you aren't going to beat government or their nefarious intermediaries ala tbtf's!

    1764 is the number..

    Jim Sinclair is interviewed by GoldMoney's James Turk

    Just after his presentation to GATA's Gold Rush 2011 conference in
    London, gold trader and mining entrepreneur Jim Sinclair was
    interviewed by GoldMoney founder James Turk about how he calculates
    his price expectations for gold, the likely acceleration of gold's
    upward trend, the "embarrassment" of the U.S. government's latest
    debt-ceiling legislation, and debt contagion in the Western world. The
    interview is 10 minutes long and you can watch it at the GoldMoney
    Internet site here:

  3. Good day to you Dave.

    Check out these prices Dave

  4. I would guess at the U.S. open they will to whatever it takes to keep the stock market stabilized. The playbook also dictates they sell the living shit out of the paper gold/silver exchange come tomorrow. Think like a criminal and all, lol.

  5. Dave,
    Thanks for your insights over the last few years. I've made money from them.

    What will it take for the majority of Americans, including the lib's, to have that "O, shoot" moment when they realize that all the promised benefits can't possibly be paid? I read somewhere that the outstanding US debt plus unrecorded liabilities of the federal government is about 66 trillion, present value basis. Isn't that enough for a "game over" revelation moment for the sheeple?

  6. Whenever KingWorldNews interviews Rickards I listen, but then I follow this blog too and value its view.

    Having listened to the recent Rickards interview, one key point he made was the belief that the U.S. still has physical possession of the gold, despite any leasing that may have occurred.

    Yes, of course I would like to have a through audit... blab blab blab. No way I trust the government.

    Did you all note how Rickards ended the interview? Basically he stated that the government will still be in the drivers seat even if gold is included in a SDR basket that supplants the USD as reserve currency.

  7. different game is going on, different level.hardest thing is to not deceive yourself

  8. check out

    the "unfunded" is over 100 trillion.

    before "obamacare"

    SO, when will someone realize that those who created the problems, those that allowed the problems to grow exponentially for decades, should not be those called on to fix the problems.

    Never probably.

  9. best comment Sunday nite on Bloomberg Asia, responding to question "where do you put your money"?

    Answer: well, you don't want to put all your money in gold. Certainly not North Atlantic currencies. Asian Currencies possibly.

  10. You can always tell when most people don't own something...maybe the Chinese and Germans should watch this.

    U.S. could run off with other nations' gold, Rickards tells CNBC

    Geopolitical analyst James G. Rickards, who spoke at GATA's Gold Rush 2011 conference in London on Saturday, was back in the United States this morning for an interview about gold on CNBC, where he said the United States is a gold superpower and, as currencies collapse, well might confiscate the gold it vaults for other nations. The interview is five minutes long and you can watch it at the CNBC archive here:

  11. dave, off the topic. If ecu was offered .97 er share is this not a steal or am I missing something? Is there news out about the deal that I don't know?
    Please inform.


  12. (Dave)

    Ari, I wish I knew what was going on. All of the juniors are performing like crap. ECU maybe down a little more than most, but they are all getting hammered. This too shall pass...right now I'm using 4 year charts with an RSI/MACD on them and comparing those technical indicators with where they were in June when we bounced and in Oct 2008.

  13. David Walker – The FED Is Self Dealing Treasury Bonds

  14. Whether or not the "US gold" is encumbered is irrelevant. It only depends upon where it actually is stored at the time of the end game. Possession in this case will be 10/10ths of the law. If there is gold in Ft. Knox or any other large depository in the US...well, your gold belongs to Uncle Sam. Any "encumbered" gold held in possession by the US govt will be repaid in newly issued paper tickets from the Treasury. Hence, I think both Rickards and you are correct in the final analysis.

  15. tell someone to buy gold they will listen now tell them Fort Knox is empty your are still a nutter.
    Our time will come

  16. It was a year ago that the story about fake gold bars with Ft Knox Gold Vault serial numbers floating around. Most of the gold probably has been faked in our vaults. With no Audits, the whole financial system is a joke.